Nigerian Cryptocurrency Exchanges Face Licensing Hurdles, Call for SEC's Guiding Principles Review
Date: 2024-01-29 Author: Dima Zakharov Categories: IN WORLD
Challenges in Licensing
Nigerian cryptocurrency analyst, Rume Ofi, highlights the need for the Securities and Exchange Commission (SEC) to reconsider its recommendations for Virtual Asset Service Providers (VASPs). These recommendations should allow local cryptocurrency exchanges to obtain licenses to operate in the country. Ofi explains that the existing SEC recommendations for VASP registration do not favor local crypto exchanges. He emphasizes that local exchanges should have been prioritized when formulating regulatory guidelines.
License Requirements
To acquire a VASP license from the SEC, exchanges must comply with application processing requirements and pay registration fees, among other applicable charges. Ofi points out that many local exchanges cannot afford the minimum capital of 500 million Naira (approximately $556,620), which could lead to predominantly foreign exchanges operating in Nigeria, an outcome that requires a healthy balance.
Collaborative Efforts
Supporting Ofi's perspective, Kue Barinor Paul, a Nigerian legal representative for Web3, suggests that Nigerian crypto exchanges and VASPs may need to collaborate to meet the SEC's licensing requirements. Paul asserts that the SEC of Nigeria needs to overhaul its license registration system, as the current requirements primarily favor foreign exchanges.
Government Involvement
Ofi further notes that the Nigerian National Assembly needs to engage in ensuring compliance with the SEC's licensing requirements in line with the country's economic realities.
Global Crypto Awareness
A global survey involving respondents from 15 countries revealed that Nigeria, Africa's largest economy, boasts the highest level of cryptocurrency awareness in the world. According to Chainalysis' "2023 Geography of Cryptocurrency Report," Nigeria ranked second in cryptocurrency adoption among 154 evaluated countries.
Impact on Investments
The anticipated widespread adoption of cryptocurrency in Nigeria was expected to attract increased foreign investments. However, Ofi attributes the low level of investments to recent restrictions on financial institutions serving cryptocurrency exchanges.
