Nigeria’s Securities and Exchange Commission (SEC) has recently given a 30-day ultimatum to crypto exchanges and digital asset traders to re-register their businesses. The warning includes enforcement actions against those who fail to comply with the new regulations. This initiative is a part of the Accelerated Regulatory Incubation Program (ARIP) for Virtual Assets Service Providers (VASPs), set up by the SEC to revamp existing rules on digital assets issuance, offering platforms, exchanges, and custody to match current industry trends.
Nigeria has witnessed a significant surge in crypto adoption, ranking second on Chainalysis’ Global Crypto Adoption Index in 2023, a stark rise from its 11th position in the previous year. This growth occurred amidst a two-year ban by the Central Bank of Nigeria on banks facilitating crypto transactions. The SEC’s move to implement stricter regulations comes at a time when digital assets are under increasing scrutiny due to fraudulent activities and risks associated with total investment losses.
Earlier this year, Nigerian authorities raised concerns over exchanges like Binance for allegedly enabling money laundering and influencing the foreign exchange market. The preference for digital currencies over the naira has led to the devaluation of the fiat currency, exacerbating the country’s economic challenges. Regulatory bodies such as the Economic and Financial Crimes Commission (EFCC) and the Federal Inland Revenue Service (FIRS) have accused Binance executives of tax evasion and money laundering, leading to their detention for a period before the charges were eventually dropped.
Despite the obstacles faced by the industry, Nigeria’s crypto market remains active and vibrant. The International Monetary Fund (IMF) has suggested that the country implement a comprehensive regulatory framework for the digital asset sector to address some of its economic issues. The SEC’s plans to explore tokenization by piloting a permissioned liquidity pool consisting of tokenized bonds and deposits signify a step towards tighter regulations to uphold the integrity and stability of the financial system amidst the rapid evolution of digital assets.
The call for stricter regulations in Nigeria’s crypto market reflects a broader effort to mitigate risks, combat fraudulent activities, and ensure the overall stability of the financial system in the country. Regulatory bodies, market participants, and industry stakeholders must work together to create a secure and transparent environment for digital asset trading to thrive and contribute positively to Nigeria’s economy.
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