Regulators in Nigeria's Securities and Exchange Commission have unveiled a regulatory sandbox initiative specifically designed for cryptocurrency companies
Nigeria's SEC Shapes New Regulatory Landscape for Digital Assets
In a significant move, the Nigerian Securities and Exchange Commission (SEC) has introduced new regulations for virtual assets service providers (VASPs) under the Investment and Securities Act (ISA) 2025. This Act formally recognizes cryptocurrencies, stablecoins, utility tokens, NFTs, and other digital assets as securities, bringing these virtual assets under the SEC's regulatory purview.
Key points about the regulations and recent changes include:
- The ISA 2025 mandates all platforms—such as exchanges, wallets, and decentralized finance (DeFi) platforms—to be licensed by the SEC to operate legally in Nigeria.
- The SEC is advocating for a balanced approach that encourages innovation in digital assets while ensuring market protection and consumer safety.
- The SEC has launched the Accelerated Regulatory Incubation Program (ARIP), an initiative aimed at facilitating regulatory clarity and onboarding of digital asset businesses.
- A Unified Virtual Asset Service Provider (VASP) Licensing System is advocated for by the SEC, particularly in a regional West African context, to prevent regulatory arbitrage and combat crypto-related crimes across borders.
- To strengthen surveillance and enforcement, the SEC plans to deploy AI-powered blockchain analytics tools to track illicit transactions and enhance market integrity efforts.
- The SEC is explicitly welcoming stablecoin operations within regulated and protective frameworks.
Recent developments have seen the SEC set a 30-day ultimatum for VASPs to register under ARIP. Registration under ARIP does not automatically transfer to full licensing, and the SEC has outlined conditions that VASPs must fulfill before it registers them. The processing fee for registration under ARIP is N2,000,000 (roughly $1,350).
The SEC has also declared that it will commence enforcement action against crypto companies that fail to comply within the time stipulated, and has set a N20 million (roughly $13,500) fine for any VASP operating without registration.
However, the regulatory landscape for VASPs in Nigeria has seen some fluctuations. In February, Nigerian authorities directed telecommunications service providers to disable access to major crypto exchanges. The National Security Adviser classified crypto trading as a national security threat earlier this year.
Despite this, the Central Bank of Nigeria's directive in December allowed banks to open accounts for crypto companies. However, recent events indicate a potential shift towards a ban, with the SEC's new director general hinting at a potential plan to ban the naira from all peer-to-peer exchanges in a virtual meeting with players in the crypto ecosystem in Nigeria.
In conclusion, the SEC's new regulations under the ISA 2025 and ARIP have transformed the regulatory landscape by formally classifying digital assets as securities, mandating licensing of all VASP activities, deploying advanced AI surveillance for compliance, and fostering regional regulatory cooperation within West Africa to address security risks associated with virtual assets. The future of digital assets in Nigeria remains uncertain, with the potential for a ban on the naira from peer-to-peer exchanges.
- The new regulations introduced by Nigeria's SEC under the Investment and Securities Act (ISA) 2025 classify digital assets such as cryptocurrencies, stablecoins, utility tokens, NFTs, and other digital assets as securities.
- The SEC's Accelerated Regulatory Incubation Program (ARIP) is aimed at facilitating regulatory clarity and onboarding digital asset businesses like fintech startups in Nigeria.
- The SEC is advocating for a Unified Virtual Asset Service Provider (VASP) Licensing System, particularly in a regional West African context, to foster regulatory cooperation and combat crypto-related crimes across borders.
- The SEC has declared its intention to commence enforcement action against crypto companies operating without registration, potentially hinting at a future ban on the use of the naira in peer-to-peer exchanges, which could impact the business and finance landscape of Nigeria's digital assets and fintech sector.
