Nigeria's New Crypto License Rules May Curb Local Exchanges, Stimulate Foreign Investment
Summary:
Nigeria's Securities Exchange Commission's (SEC) new crypto license regulations may cap the number of operational domestic crypto exchanges, despite the Central Bank of Nigeria lifting restrictions on banks handling cryptocurrency transactions. Stricter rules require exchanges to obtain a virtual asset service provider (VASP) license from the SEC and meet a $556,620 minimum capital requirement. While Nigeria ranks high in crypto awareness and adoption, anticipated foreign investment growth hasn't met expectations, largely due to bans on financial institutions servicing crypto exchanges. However, lifting these restrictions could increase foreign investment and local employment opportunities in the crypto industry.
New guidelines by Nigeria's Securities Exchange Commission (SEC) for obtaining a cryptocurrency license could significantly curtail the number of operational domestic crypto exchanges. This is despite the Central Bank of Nigeria (CBN) withdrawing its restrictions on banks conducting cryptocurrency transactions, says Rume Ophi, a Nigerian crypto analyst. As per Rume's dialogue with Cointelegraph, he pointed out that many local exchanges struggle to satisfy the $556,620 (N500 million naira) minimum paid-up capital requirement, giving likely prominence to foreign exchanges operations in the country.
In May 2022, the Nigerian SEC made public a comprehensive 54-page guideline, "New Rules on Issuance, Offering Platforms and Custody of Digital Assets," intending to steer cryptocurrency service providers in Nigeria. This manual mainly dictates how banking and financial institutions in the country can interact with digital assets.
Pertaining to the SEC's edict, exchanges have to secure a virtual asset service provider (VASP) license from the SEC. This involves satisfying application processing requirements, registration fees, and other associated charges.
As per a worldwide survey across 15 countries, Nigeria, Africa's largest economy, boasts the highest number of individuals knowledgeable about cryptocurrency. Nigeria secured the eighth spot in crypto adoption and usage amongst 154 countries in Chainalysis’ 2020 Cryptocurrency Geography Report. Although it was anticipated that the high adoption rate would attract more foreign crypto investment, the reality has been the opposite, and Rume believes the ban imposed on financial institutions dealing with crypto exchanges is primarily at fault for this downturn in investment.
However, Rume suggested that the recent CBN decision to lift the ban could bolster Nigeria's foreign crypto investments and promote local recruitment within the Web3 and crypto sectors. Related news - Asia Express published that a Hong Kong game company is planning to purchase $100M crypto for its treasury, and a central bank digital currency (CBDC) deal is underway between China and UAE.
Published At
12/31/2023 12:19:36 PM
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