Nigeria’s Securities and Exchange Commission (SEC) has issued a directive requiring all Virtual Asset Service Providers (VASPs), including cryptocurrency firms, to establish local offices within Nigeria to qualify for participation in its Accelerated Regulatory Incubation Programme (ARIP). This mandate, effective June 21, aims to streamline the registration and integration of VASPs in anticipation of forthcoming Digital Assets Rules, emphasizing adherence to regulatory standards and investor safeguarding.
Under the new regulations, VASPs must operate within the ARIP framework until amendments covering digital asset issuance, trading platforms, exchanges, and custody services are finalized. In addition to maintaining a physical presence, CEOs or managing directors of these entities must reside locally and demonstrate operational readiness, including live customer support and preparedness for full registration once regulatory guidelines are established. Products and services offered must address industry-specific challenges or provide significant consumer benefits to ensure investor protection.
The regulatory framework applies to entities operating in Nigeria or offering services to Nigerian consumers, encompassing platforms facilitating digital asset offering, trading, exchange, custody, and transfer. The SEC intends to use ARIP to expedite the onboarding process for entities that have applied or plan to register with the Commission, potentially granting preliminary approval subject to full compliance with Digital Assets Rules.
VASPs participating in regulatory incubation must adhere to specific guidelines, including restrictions on guaranteeing financial returns and limitations on client acquisition. The incubation period spans one year, after which firms must either achieve full registration or cease operations if eligibility criteria are not met. The SEC retains discretion to terminate participation if firms fail to maintain eligibility, breach conditions, deviate from implementation plans, or neglect to apply for registration or submit an exit strategy within the stipulated timeframe.
Applicants are required to submit comprehensive implementation plans outlining business models, objectives, risk management frameworks, and communication strategies. Submission criteria also include a sworn statement verifying absence of fraud convictions, an operational plan, a business model with clear value propositions, and provisions for investor protection. Moreover, applicants must pay a processing fee of 2 million naira ($1,277) and furnish evidence of required shareholder funds.
Participants in ARIP are obligated to provide weekly and monthly trading statistics, quarterly financial reports, compliance updates, and incident reports. Non-compliance with ARIP regulations may result in penalties starting from 5 million naira ($3,194) and escalating daily for continued infractions. Unregistered commercial VASPs face penalties beginning at 20 million naira ($12,776), while other digital investment platforms, such as crypto brokers and advisors, may incur fines of at least 10 million naira ($6,388).
In March, Nigeria’s SEC proposed amendments to crypto service platform regulations, including a significant increase in registration fees for crypto exchanges from 30 million naira ($18,620) to 150 million naira ($93,000).
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