Nigeria Embraces Crypto, Grants Licenses to Operators

Nigeria has officially embraced the cryptocurrency industry, with its Securities and Exchange Commission (SEC) granting operational approvals to several crypto operators. This move marks a significant shift in the country's stance on digital currencies, following a period of restrictions.

On Thursday, the SEC announced the granting of approval-in-principle to two Digital Asset Exchanges, allowing them to commence operations under the Accelerated Regulatory Incubation Program (ARIP). Additionally, five firms were admitted to the Regulatory Incubation Program (RI Program), enabling them to test their models and technology under close regulatory supervision.

The approved firms include Busha Digital Limited, Quidax Technologies Limited, Trovotech Ltd, Wrapped CBDC Ltd, HousingExhange.NG Ltd, Dream City Capital, and Blockvault Custodian Ltd. These firms represent a diverse range of crypto services, including exchanges, offering platforms, and custodial services.

The ARIP was introduced by the SEC to integrate firms already operating before the implementation of the Rules on Virtual Asset Service Providers in May 2022. The RI Program was designed to evaluate digital asset firms' business models and allow them to test their products and services in a live market environment under the regulator's watchful eye.

This development follows a recent announcement by Zacch Adedeji, Chairman of the Federal Inland Revenue Service (FIRS), stating that the government is preparing an executive bill to revamp revenue administration, including regulating the cryptocurrency sector.

"We need a law that regulates that area of our economy," Adedeji explained, highlighting the government's commitment to responsible regulation of the burgeoning crypto market.

SEC's approvals come despite previous crackdowns on the crypto sector in 2024, which followed the lifting of a ban on official crypto transactions in December 2023. The government had initially targeted crypto operators, citing concerns over their impact on the naira's volatility, tax evasion, and potential links to terrorism financing.

The SEC emphasised that these approvals serve as a preliminary step towards full registration and are intended to ensure proper protection and transparency for investors and consumers. With these approvals, Busha Digital Limited and Quidax Technologies Limited have become the country's first "licensed" crypto operators.

“I am pleased to announce that Busha has been granted one of the first provisional licenses from the Nigerian Securities and Exchange Commission to operate as a regulated Virtual Asset Service Provider,” tweeted Michael Adeyeri, Busha's Chief Executive Officer. He noted that the company had been actively engaged in the regulatory process for over five years, ensuring their systems prioritise security and compliance.

Nigeria boasts one of the world's largest peer-to-peer (P2P) crypto markets. According to Chainalysis, a global blockchain platform, crypto transactions in the country totalled $56.7 billion between July 2022 and June 2023.

Analysts believe that regulating crypto will prove beneficial for Nigeria's economic development. Senator Ihenyen, lead partner and head of blockchain and virtual assets practice at Infusion Lawyers, remarked, "Nigeria can no longer afford to keep pushing digital assets underground for obvious economic and security reasons. Our regulators will now work together to ensure consumer protection and investor safety.”

The SEC clarified that the accepted cohort comprises two Digital Asset Exchanges, four Digital Asset Offering Platforms, and one Digital Asset Custodian. It further stated that additional applications to the ARIP and RI Program are under review, with approval-in-principle being granted on a case-by-case basis upon meeting the required criteria.

“The SEC uses this medium to reiterate that only approved digital exchanges and platforms are legally authorised to carry out the business of crypto trading in any form in Nigeria," the commission stated. "In this regard, the ARIP and RI remain the only avenues for well-intentioned entities to legitimately introduce their digital products and services to the Nigerian Capital market.”

The SEC has taken the lead in establishing a comprehensive regulatory framework for the crypto industry, particularly after the Central Bank of Nigeria (CBN) lifted its ban in December 2023 and transferred regulatory oversight to the SEC. The commission has announced its intention to monitor the weekly and monthly trading statistics of Virtual Assets Service Providers (VASPs), including crypto automated teller machines (ATMs), exchanges, P2P platforms, and custodians, as part of its ongoing regulatory oversight.