Nigeria's SEC announces regulatory sandbox for crypto firms

Nigeria’s Security and Exchange Commission (SEC) has asked virtual assets service providers (VASPs) in the country to register under the Accelerated Regulatory Incubation Program (ARIP).

It wants to fast-track the onboarding process for these companies by granting them interim approval through ARIP pending the time its digital asset rules become enforced. 

The details

• In a circular dated June 21, the SEC said it is currently working on amending its existing guidelines on digital assets in line with present realities in the cryptocurrency world. 
• In the meantime, it is providing a special window for VASPs to be registered temporarily to allow these companies to receive guidance on the SEC’s regulatory demands and for the commission to better understand the space. 
• The SEC outlined conditions that these VASPs must fulfill before it registers them under ARIP and gave a 30-day ultimatum for registering. 
• It set the processing fee at $2,000,000 (roughly $1,350) and declared that it would commence enforcement action against crypto companies that fail to comply within the time stipulated. It set a N20 million (roughly $13,500) fine for any VASP operating without registration. 
• The SEC added that it hopes the companies it registers under ARIP will smoothly transition into formal registration when the time expires, effectively declaring that registration under ARIP does not automatically transfer to full licensing.

Key quote

• The SEC said: 

“The Securities and Exchange Commission hereby notifies the general public, that the Rules on Digital Assets Issuance, Offering Platforms, Exchange and Custody is going through an amendment process ... The Commission hereby provides a special window for the onboarding of Virtual Assets Service Providers tagged Accelerated Regulatory Incubation Program.” 

Key background

• The Nigerian government has, in recent months, clamped down on crypto assets as it battles a rapidly devaluing currency and inflation.
• Earlier this year, the National Security Adviser (NSA) classified crypto trading as a national security threat and directed four fintech startups in the country to block accounts trading in crypto and report them to law enforcement.
• In February, Nigerian authorities directed telecommunications service providers to disable access to major exchanges because they believed trading on these platforms was done to manipulate foreign exchange rates.  
• In a virtual meeting with players in the crypto ecosystem in Nigeria, the SEC’s new director general, Emomotimi Agama, hinted at a plan to ban the naira from all peer-to-peer exchanges. 
• However, last December, in what looked like an interest to regulate rather than ban cryptocurrencies from the Nigerian government, the Central Bank of Nigeria (CBN) issued a directive permitting banks to open accounts for crypto companies. 
• This is in sharp contrast to the latest events which portray a tendency to ban the asset class.