Nigerian SEC grants provisional crypto licenses amid regulatory shift

Following months of heightened uncertainties fueled by the Nigerian government’s crackdown on peer-to-peer trading of cryptocurrencies, the country’s Securities and Exchange Commission (SEC) has granted “approval-in-principle” to two digital asset exchanges, marking a significant shift in the country’s approach to cryptocurrency regulation.

The details

• On Aug. 29, the SEC announced that Busha Digital Limited and Quidax Technologies Limited have been approved to commence operations under the ARIP.
• This comes two months after the SEC introduced the Accelerated Regulatory Incubation Program (ARIP), a sandbox-like regime under which the Commission seeks to grant interim approvals to digital asset companies as it seeks to better understand the industry.
• Four additional firms have been admitted to test their models under the SEC’s Regulatory Incubation (RI) Program.
• One of the other four firms is Wrapped CBDC Ltd, the entity behind cNGN, a naira-pegged stablecoin reportedly backed by a consortium of financial institutions, fintech innovators, and blockchain experts.
• The approvals are part of the SEC’s efforts to enable innovation while ensuring investor protection in the digital asset space.
• The ARIP was introduced to onboard firms that had started operations before the release of the Rules on Virtual Asset Service Providers in May 2022.
• The RI Program aims to assess the business models of digital asset firms and test innovative products in a controlled environment.

Key quote

• The SEC stated:

“The outcome of the process would inform further policy development in this space. Tests would be conducted on a short-term and small-scale basis and the SEC would continue to work with the participating firms to agree on testing parameters as well as robust consumer safeguards.”

Approved firms and their functions

Two Digital Assets Exchanges

Busha Digital Limited:

• Facilitates buying and selling of crypto assets with fiat currency
• Enables basic digital asset investment services in Nigeria and other developing economies

Quidax Technologies Limited:

• Operates a cryptocurrency trading platform in Nigeria
• Utilizes a proprietary blockchain for listing and trading crypto tokens

Four Digital Asset Offering Platforms:

• Trovotech Ltd: Focuses on tokenizing real-world illiquid assets as securities
• Wrapped CBDC Ltd: Plans to introduce a Nigerian-issued stablecoin (cNGN)
• HousingExhange.NG Ltd: Aims to enable real estate tokenization and investment
• Dream City Capital: Developing a digital real estate investment platform

One Digital Asset Custodian:

Blockvault Custodian Ltd: Provides secured infrastructure for storage and management of digital assets

Before now

This development comes after months of uncertainty in the Nigerian crypto space, including:

• A crackdown on peer-to-peer trading platforms in early 2024
• The arrest of two Binance executives in February 2024, with one still in custody
• Calls from the Senate Committee on Capital Markets for crypto regulation in May 2024

What’s next

• The SEC emphasized that only approved digital exchanges and platforms are legally authorized to carry out crypto trading in Nigeria.
• The commission warned the public against dealing with unauthorized operators and advised potential investors to verify the legitimacy of investment services through SEC information portals.
• This regulatory shift could potentially ease tensions between crypto businesses and Nigerian authorities, possibly paving the way for clearer guidelines and a more structured approach to cryptocurrency operations in the country.