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On Aug 29, the Nigerian Securities and Exchange Commission (SEC) announced in a press release that it had granted Approval in Principle (AIP) to two Crypto exchanges under its Accelerated Regulatory Incubation Program (ARIP) and admitted five other Digital Assets Firms into its Regulatory Incubation (RI) program.
Busha and Quidax have become the first crypto exchanges in Nigeria to be granted AIPs by the Nigerian SEC to operate under its ARIP. As for their RI program, the five firms admitted are Trovotech Ltd, Wrapped CBDC Ltd, HousingExhange.NG Ltd, Dream City Capital, and Blockvault Custodian Ltd.
Nigeria’s SEC Digital Assets Regulatory Programs
The Nigerian SEC currently has two separate but related regulatory incubation programs to carefully regulate and oversee digital assets firms’ operations, together serving as a foundation to craft and implement more robust regulation for firms seeking to operate in the digital assets space in Nigeria.
These programs and associated AIPs are intended to precede a full registration with the Nigerian SEC to ensure proper transparency and protection for each supervised product and service.
We can expect more approvals as other applications for these programs are still under review and will be approved based on their adherence to the Nigerian SEC’s requirements.
The Accelerated Regulatory Incubation Program (ARIP)
Following the recent changes to regulation on Virtual Assets Services Providers (VASPs) by the Central Bank of Nigeria (CBN), the Nigerian SEC introduced its ARIP to onboard VASPs as part of an amendment process to realign its rules on digital assets issuance, offerings, custody, and exchange with the recent regulatory developments.
The Regulatory Incubation (RI) Program
Additionally, the RI program is focused on assessing Digital Assets Firms’ business models under the Nigerian SEC’s supervision in real-time market environments. This includes but is not limited to testing novel products, services, and offerings to form cohesive and relevant policies.
Potential Regulatory Implications
The Nigerian SEC has communicated that all digital assets firms that lack a license from them are operating illegally and advises the public to refrain from using such platforms and services.
Given the range of firms approved, the results from these activities will undoubtedly have wide-ranging effects on the regulatory landscape across the P2P market, digital assets custody, and the development of stablecoins such as the cNGN.
It is important to note that Blockvault’s operations under the RI program will impact how stringent the final regulatory requirements for transaction monitoring, AML/CFT laws and rules compliance, and general AML and KYC checks end up being.
Further, in the case of Bitcoin and digital assets like USDt, implementing excessive and strict regulations will detract from the utility, appeal of using these technologies, and limit their potential as inclusive global financial rails, particularly in the case of Bitcoin.
As we continue to anticipate the results of these programs on regulation, it is essential to highlight the importance of developing a holistic and practical regulatory framework that delineates between Bitcoin and other digital assets. With this distinction, regulators can avoid introducing confusion, unforeseen risks, and stifling innovation by subjecting Bitcoin to inappropriate regulations, hindering its growth and positive impact.
The Future of Bitcoin Regulation In Nigeria
Regardless of public sentiment, it is clear that there is a willingness on the part of the regulators in Nigeria to take active steps to promote innovation and development while addressing economic challenges.
Regulators can no longer ignore the digital assets space and Bitcoin’s future role in the country; instead, there is a growing realization across the board of the permanence of these technologies and ecosystems, and therefore, appropriate regulatory measures must be formulated and adopted.
As other regions on the African continent and globally continue to regulate the Bitcoin space, Nigeria will need to develop appropriate regulations that balance competitive markets, address its numerous economic challenges, and drive economic growth to remain economically competitive.