Nigeria’s Securities and Exchange Commission (SEC) has issued a 30-day ultimatum for crypto exchanges and digital asset traders to re-register their businesses, warning of enforcement actions against non-compliance. This move comes as part of the Accelerated Regulatory Incubation Program (ARIP) for Virtual Assets Service Providers (VASPs), aimed at aligning existing rules on digital assets issuance, offering platforms, exchanges, and custody with current industry trends.
Despite a ban by the Central Bank of Nigeria (CBN) on banks facilitating crypto transactions, Nigeria has witnessed significant growth in crypto adoption, ranking second on Chainalysis’ Global Crypto Adoption Index in 2023. However, this growth has come under scrutiny, with the SEC warning against fraudulent entities misusing the name of popular crypto exchange Binance and emphasizing the risks associated with digital assets.
Nigerian authorities have accused exchanges like Binance of facilitating money laundering and influencing the foreign exchange market, leading to a crackdown on such platforms. The government’s concerns were further exacerbated by the devaluation of the national currency, the naira, as more Nigerians turned to digital currencies. The Economic and Financial Crimes Commission (EFCC) and the Federal Inland Revenue Service (FIRS) went as far as charging Binance executives with tax evasion and money laundering, highlighting the complex challenges facing the crypto market in Nigeria.
Amidst these challenges, the International Monetary Fund (IMF) has recommended that Nigeria adopt a comprehensive regulatory regime for the crypto industry to address some of its economic woes. The SEC is contemplating tokenization and plans to pilot a permissioned liquidity pool comprising tokenized bonds and deposits. These efforts underscore the necessity for stricter regulations to safeguard the integrity and stability of Nigeria’s financial system in the face of the evolving digital assets landscape.
While Nigeria’s crypto market remains vibrant, it is imperative for the government and regulatory bodies to enforce stricter regulations to combat illicit activities, protect investors, and ensure the long-term sustainability of the industry. The SEC’s ultimatum for crypto exchanges is just one step towards achieving this goal, and more comprehensive measures may be necessary to address the challenges faced by Nigeria’s crypto market effectively.
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