SEC Includes Local Offices Among Nigerian Crypto Firms Requirement

The Securities and Exchange Commission (SEC) of Nigeria has added a new mandate for virtual asset service providers (VASPs), requiring that they set up an office in Nigeria to be qualified for its framework program.

The SEC said in a post on its website that entities must be formed and have an office in Nigeria to qualify for the Accelerated Regulatory Incubation Program (ARIP), which is meant to onboard VASPs in Nigeria.

Besides, the managing director or CEO has to live in Nigeria. Candidates must be involved in investing and securities business, either seeking registration or having outstanding applications linked to virtual assets with the SEC.

In a June 21 circular, the SEC instructed all current and future VASPs—including dealers and crypto brokers—to finish their applications using the SEC ePortal within 30 days.

VASPs are obliged to operate under the ARIP for now even as the guidelines on digital assets issuing, offering platforms, exchange and custody are changing.

The SEC claims that the ARIP intends to speed up the onboarding process for companies seeking SEC registration. Theoretically, it offers temporary approval until the Digital Assets Rules are completely running.

Platforms enabling the offering, trading, exchange, custody, and transfer of digital assets apply to virtual asset service providers and token issuers operating in Nigeria or catering to Nigerian clients.

Application criteria include an operational plan, a business model with a clear value proposition and investor protection clauses, and a sworn affidavit attesting to no fraud or dishonesty convictions.

Applicators must show proof of necessary shareholder funds; the processing fee is 2 million naira ($1,277). ARIP members are supposed to turn in quarterly financial statements, weekly and monthly trading data, compliance reports, and incident reports.

The SEC said noncompliance with ARIP criteria could lead to penalties starting at 5 million naira ($3,194) and rising daily by 200,000 naira ($127.76).

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While other digital investment platforms, like crypto brokers and advisers, risk fines of at least 10 million naira ($6,476, unregistered commercial VASPs face penalties of at least 20 million naira ($12,776).

Suggesting a rise in the registration price for crypto exchanges from 30 million naira ($18,620), Nigeria’s SEC proposed a revision to the regulations controlling platforms offering crypto services in March.

The Investments and Securities Act (ISA), 2007 powers the SEC to control and grow the Nigerian Capital Market; the Act forbids any expert or professional from engaging in any activity in the Nigerian Capital Market save upon Commission registration.

Crypto firms must also report any major issues resulting from fraud, malfeasance, or operational incidents, along with any action the Participant took to remedy the incident.

Additionally, companies must provide any actions or procedures they have taken in response to consumer complaints, emerging hazards, or other matters pertinent to the Commission’s evaluation of the relevant regulatory requirements.

Crucially, the framework mandates that cryptocurrency businesses be vulnerable to the SEC’s audit, surveillance, and on-site and off-site inspection processes.

Conclusion 

The recent mandate by Nigeria’s Securities and Exchange Commission (SEC) represents a significant regulatory shift for virtual asset service providers (VASPs) in the country. By requiring VASPs to establish a physical presence and have their top executives reside within Nigeria, the SEC aims to enhance oversight and foster a more robust digital asset ecosystem. 

The Accelerated Regulatory Incubation Program (ARIP) offers a structured pathway for these entities to achieve compliance, providing temporary approval as the digital asset regulations evolve. However, the stringent criteria and substantial penalties for noncompliance underscore the SEC’s commitment to maintaining market integrity. As the digital assets landscape continues to grow, this regulatory framework could serve as a model for balancing innovation with investor protection.