While this application process is intended to improve compliance, VASPs are directed to complete it no later than 30 days from the circular date.

The Nigerian Securities and Exchange Commission (SEC) has revised its rules regarding Digital Asset Issuance, Offering Platforms, Exchange, and Custody to better accommodate the rapidly evolving digital asset market. Here’s a comprehensive breakdown of the key changes and their implications:

Key Amendments and Additions

Accelerated Regulatory Incubation Programme (ARIP):
- Introduction of ARIP: This new compliance program is specifically designed for Virtual Assets Service Providers (VASPs), offering them a structured path to meet the updated regulatory requirements.
- Onboarding Process: The SEC has established a special window for the onboarding process through its ePortal, allowing VASPs to participate in ARIP. The application must be completed within 30 days from the circular date.

Regulatory Enhancements

Comprehensive Compliance:
- Strengthened Oversight: The amendments aim to create a more comprehensive regulatory environment, improving oversight and responsiveness to the complexities of digital asset markets.
- Enforcement Actions: The SEC has issued a stern warning about cracking down on non-compliant VASPs, emphasizing strict enforcement actions against those that fail to adhere to the new regulations.

Background and Context

Previous Regulations:
- Initial Rules: The initial rules on Digital Assets Issuance, Offering Platforms, Exchange, and Custody were issued in May 2022.
- Amendment Proposal: In March, the SEC proposed an amendment to increase the registration fee for crypto exchanges from 30 million naira ($18,620) to 150 million naira ($93,000).

New Leadership:
- Director-General Appointment: The amendment follows the appointment of a new Director-General, Emomotimi Agama, who has emphasized the need for responsible regulation over harsh clampdowns.

Implications for the Crypto Market

Market Positioning:
- Fast-Growing Economy: Nigeria has become one of the fastest-growing crypto economies and was the second-biggest economy in terms of crypto adoption in 2023. The country has shown a significant interest in cryptocurrencies, as indicated by Google search trends.

Industry Reception:
- Positive Steps: The SEC’s amendments are seen as positive steps towards creating a stable and transparent regulatory environment that encourages growth while protecting investors.
- Challenges: The increase in registration fees and stringent compliance requirements might pose challenges for smaller crypto firms, but they are necessary to ensure market integrity and investor protection.

Conclusion

The Nigerian SEC’s amendments to its digital asset regulations represent a significant effort to modernize and strengthen the regulatory framework for the burgeoning crypto market. By introducing the ARIP and enhancing compliance mechanisms, the SEC aims to foster a more secure and robust environment for digital asset transactions. These changes are expected to have far-reaching impacts on how VASPs operate in Nigeria, ultimately aiming to position the country as a leader in crypto adoption and regulation.