Nigerian exchanges face licensing hurdles as analysts urge SEC to adjust regulations

Nigeria's Securities and Exchange Commission (SEC) crypto licensing requirements should revisit the Virtual Asset Service Providers (VASP) guidelines to allow domestic crypto exchanges to obtain licenses to operate in the country, according to Nigerian crypto analyst Rume Ofi.

In an interview with Cointelegraph, Offi stated that the guidelines issued by the SEC to guide the registration of VASP are not favorable to indigenous crypto exchanges and that domestic exchanges should have taken priority when issuing the guidelines.

Exchanges must obtain VASP authorization from the SEC by complying with the application process requirements, registration fee and other applicable fees.

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– The cryptopreacher. (@Rumerule) January 26, 2024

Ofi said many local exchanges are unable to meet the minimum initial capital of 500 million naira ($556,620), mainly because foreign exchange is used instead of maintaining a healthy balance in Nigeria.

Supporting Ofi's view, Nigeria's Web3 legal representative, Kue Barinor Paul, said at a Spaces discussion hosted by Ofi, that Nigerian crypto exchanges and VASPs should join forces to meet the SEC licensing requirement.

Paul said the Nigerian SEC should rework its framework for license registration as the current requirements are mainly foreign exchange friendly.

Related: Web3 faces regulatory hurdles in Africa, slowing progress

In May 2022, Nigeria's SEC published a 54-page document titled “New Rules on Publishing, Platforms and Protection of Digital Assets.” The document opens the doors to cryptocurrency service providers in Nigeria and outlines detailed guidelines on how the country's banking and financial institutions will deal with digital assets.

Ofi further stressed that the Nigerian National Assembly should be involved in ensuring that the SEC's licensing requirements are in line with the current realities of the country's economy.

A global survey with participants from 15 countries shows that Nigeria, Africa's largest economy, has the highest level of cryptocurrency awareness globally. According to Chinalysis' “2023 Cryptocurrency Geography Report,” Nigeria ranks second in crypto adoption out of 154 countries evaluated.

The country's expected high crypto adoption was expected to attract foreign crypto investment. However, Ofi explained that the minimum investment amount was recently removed from the ban on financial institutions servicing crypto exchanges.

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