Nigeria gives VASPs 30-day ultimatum to comply with new rules

Nigerian regulators are requiring Virtual Asset Service Providers (VASPs) to update their applications within 30 days to comply with new rules on digital asset issuance, platform offering, exchange and custody.

Nigeria updates crypto regulations

The Nigerian Securities and Exchange Commission (SEC) has announced plans to update key digital assets regulations in an official notice to the public. The changes aim to strengthen the regulatory framework, ensuring it is more comprehensive and adaptable to the complexity of digital asset markets.

As part of this regulatory update, the SEC launched the Accelerated Regulatory Incubation Program (ARIP). This is a special compliance initiative tailor-made for virtual asset service providers (VASPs).

The program offers VASPs a structured path to comply with the country’s new regulatory standards.

According to information published on the SEC’s website, a special participation window has been created to facilitate VASPs’ participation in ARIP.

Additionally, the SEC stated that it will initiate enforcement measures against any VASP operating that does not comply with the directives set out in its Circular.

This regulatory update is one component of Nigeria’s broader initiatives to improve oversight of the rapidly expanding cryptocurrency market.

One notable proposal following the appointment of Emomotimi Agama as the new SEC Director General is the increase of the registration fee for crypto exchanges from 30 million naira ($18,620) to 150 million naira ($93,000).

In line with these SEC changes, the Central Bank of Nigeria (CBN) has issued guidelines regulating banking relationships and account operations for Virtual Asset Service Providers (VASPs) in the country.

This coordinated effort underscores Nigeria’s commitment to responsibly regulating the virtual asset ecosystem rather than imposing blanket bans.

From prohibition to taxation

Since 2021, Nigeria’s approach to cryptocurrencies has changed significantly. Initially, the central bank banned banks from facilitating cryptocurrency transactions due to concerns about money laundering and terrorism financing.

Despite this ban, cryptocurrency adoption continued to increase, leading the government to shift towards taxation policy. Here’s a timeline:

February 5, 2021: The Central Bank of Nigeria (CBN) issued a circular directing banks, non-bank financial institutions and other financial institutions to close accounts associated with cryptocurrency transactions in their systems. February 9, 2021: CBN launched an investigation into financial institutions providing services to cryptocurrency traders. February 11, 2021: The Senate summoned the CBN and SEC to discuss the potential impacts of cryptocurrencies on the Nigerian economy and security. February 18, 2021: The International Monetary Fund (IMF) supported the CBN’s stance, highlighting concerns that cryptocurrencies could facilitate illicit activities. On February 22, 2021, the SEC emphasized the need to regulate cryptocurrencies. February 26, 2021: The CBN clarified its position, stating that individuals are not prohibited from buying and trading cryptocurrencies, but they cannot do so through Nigerian banks or fintech platforms. April 7, 2022: The SEC officially recognized digital assets as securities and issued comprehensive regulations governing the exchange and custody of cryptocurrencies in Nigeria. April 15, 2021: Discussions regarding cryptocurrency regulation between the SEC and CBN continued, as confirmed by the SEC. April 26, 2021: The Economic and Financial Crimes Commission (EFCC) has warned Nigerians about the risks of investing in Bitcoin (BTC). July 22, 2021: CBN announced plans to launch “eNaira,” a central bank digital currency (CBDC) distinct from Bitcoin and other cryptocurrencies. October 25, 2021: Nigeria became the first African country to introduce the digital currency “eNaira”. December 2, 2022: Minister of Finance, Budget and National Planning Zainab Ahmed announced provisions in the latest finance bill that will impose a tax on cryptocurrencies and other digital assets. May 28, 2023: Former President Muhammadu Buhari signed into law the finance bill 2023, which imposes a 10% tax on gains from the disposal of digital assets.

Despite facing regulatory challenges, Nigeria continues to emerge as a global leader in cryptocurrency adoption. The volume of crypto transactions in the country increased by 9% annually to $56.7 billion between July 2022 and June 2023.