Nigeria has granted operational approvals to several cryptocurrency operators, signaling its formal acceptance of digital currency. The Securities and Exchange Commission (SEC) led this significant move, highlighting the growing importance of digital currency in the global economy. The SEC’s latest actions demonstrate a shift in Nigeria’s approach to cryptocurrency, aiming to regulate and integrate the digital asset market into the broader financial system.
The SEC announced that it had granted approval-in-principle to two Digital Asset Exchanges under its Accelerated Regulatory Incubation Program (ARIP). Additionally, five other firms were admitted into the Regulatory Incubation Program (RI Program) to test their models and technologies under the commission’s supervision. This development is a key step in creating a regulated environment for digital assets in Nigeria, a major player in the global peer-to-peer (P2P) cryptocurrency market.
The companies approved under these programs include Busha Digital Limited, Quidax Technologies Limited, Trovotech Ltd, Wrapped CBDC Ltd, HousingExchange.NG Ltd, Dream City Capital, and Blockvault Custodian Ltd. These firms are now positioned to become major contributors to Nigeria’s digital economy, despite previous regulatory challenges.
The Accelerated Regulatory Incubation Program (ARIP) was introduced by the SEC to onboard firms that had already begun operations before the official release of the Rules on Virtual Asset Service Providers in May 2022. The program aims to bring these firms under regulatory oversight to ensure that their operations align with the new rules. On the other hand, the Regulatory Incubation Program (RI Program) is aimed at newer firms, providing them with a framework to test their products, services, and technologies in a controlled environment. Both programs are part of the SEC’s broader strategy to ensure that digital assets are managed transparently and securely within Nigeria’s financial system.
This move by the SEC comes shortly after Zacch Adedeji, chairman of the Federal Inland Revenue Service (FIRS), announced that the Nigerian government is drafting an executive bill to overhaul revenue administration, including the regulation of the cryptocurrency industry. This bill, once enacted, is expected to establish a legal framework that balances the growth of the digital economy with the need for economic stability and security. Adedeji emphasized the importance of creating laws that protect the economy without stifling innovation. The engagement between the government and legislators on this issue reflects Nigeria’s recognition of the need for a structured approach to cryptocurrency regulation.
The SEC’s decision to grant these approvals is significant, especially after a series of crackdowns on the crypto sector earlier in 2024. After lifting the ban on official cryptocurrency transactions in December 2023, the government had targeted crypto operators because of concerns over the naira’s volatility, tax evasion, and the potential for terrorism financing. However, the recent actions of the SEC indicate a change in perspective, acknowledging the potential benefits of a regulated crypto industry for Nigeria’s economy.
The SEC has highlighted that these initial approvals are a step towards full registrations, which will be granted as the firms continue to demonstrate compliance with regulatory requirements. The goal is to establish a transparent and secure environment for digital asset transactions, ensuring that consumers and investors are protected. With these approvals, Busha Digital Limited and Quidax Technologies Limited have become the first ‘licensed’ crypto operators in Nigeria, setting a precedent for others in the industry.
Michael Adeyeri, the CEO of Busha, expressed his excitement on social media, announcing that the company had received one of the first provisional licenses from the Nigerian SEC to operate as a regulated Virtual Asset Service Provider. Adeyeri highlighted the rigorous process that Busha had undergone over the past five years, focusing on security and compliance to meet the SEC’s standards. His statement reflects the significance of this achievement, not only for Busha but also for the broader Nigerian crypto community.
Nigeria is one of the largest peer-to-peer (P2P) crypto markets globally. According to Chainalysis, Nigeria saw crypto transactions totaling $56.7 billion between July 2022 and June 2023. This figure underscores the importance of the crypto market in Nigeria and the potential impact of regulatory integration on both local and global scales.
Analysts believe that the regulation of cryptocurrency in Nigeria will bring substantial benefits to the country. Senator Ihenyen, lead partner and head of the blockchain and virtual assets practice at Infusion Lawyers, has been vocal about the need to bring digital assets into the regulated financial system. He argues that Nigeria can no longer afford to push these assets underground, as doing so only increases risks to both the economy and national security. With the SEC now leading regulatory efforts, there is optimism that the cryptocurrency industry will evolve into a safer and more reliable component of Nigeria’s financial sector.
The SEC’s announcement also provided further details on the composition of the approved firms. The cohort includes two Digital Asset Exchanges, four Digital Asset Offering Platforms, and one Digital Asset Custodian. These entities will now operate under the close supervision of the SEC as they continue to develop and refine their offerings. The commission also indicated that additional applications are currently being assessed, and approvals-in-principle will be granted on a case-by-case basis once firms meet the necessary requirements.
In its statement, the SEC reiterated that only approved digital exchanges and platforms are legally authorized to conduct cryptocurrency trading in Nigeria. The commission warned that entities operating outside of these programs would be considered illegal, and appropriate enforcement actions would be taken.
