The analysts within Nigeria’s digital assets ecosystem decry the stringent conditions set by the country’s Securities and Exchange Commission (SEC) to grant licenses. Kue Paul, a Web3 legal representative in Nigeria, decried the license requirements as out of reach for most crypto exchanges and providers of virtual assets services (VASPs).
Paul illustrates that only some local crypto exchanges and VASPs can meet the license requirement set by the Nigerian SEC. The pronouncement is echoed by crypto analyst Rume Ophi, who urges the Nigerian SEC to revisit the guidelines outlined for crypto licensing requirements.
License and Capital Requirements Beyond Local Nigeria Crypto Exchanges and VASP Reach
Ophi iterates that revisiting the VASPs guidelines will ease the license requirements for the local crypto exchanges within the country. The crypto analyst revealed in an interview with the crypto news platform Cointelegraph that the present guidelines issued by the SEC to facilitate VASP registration are unfavourable to the indigenous crypto exchanges.
Ophi lamented that the country’s regulatory body disadvantages the Nigerian exchanges. He argues that the local exchanges should prioritize local exchanges when formulating such provisions.
Ophi revealed that the SEC mandates all crypto exchanges to pursue a VASP license granted on the proof of satisfying the application process, applicable registration fees and capital requirements. Few local exchanges can raise the minimum capital of 500 million naira, translating to $556,620.
The inability to afford the capital will force their exit, resulting in a scenario where foreign exchanges run operations rather than create a healthy balance.
Kue Paul concurs with Ophi’s view in his disclosure during the space conversation that Ophi hosted on X. He indicated that unless the SEC reviews the license requirements, local crypto exchanges and VASPs should consider mandatory merging in compliance with the set conditions.
Paul urged the securities watchdog to rework the licensure framework since the conditions only favour foreign exchanges.
The Crypto analysts are concerned about the requirements issued by the SEC in a 54-page publication. The May 2022 publication opens doors for crypto service providers to enter and operate in Nigeria. Also, the publication outlines how financial and banking institutions should interact with digital assets.
Ophi urges the National Assembly for input to ascertain that the licensing requirements conveyed by SEC align with the present realities of Nigeria’s economy.
Low Investment Rate in Nigeria Crypto Explained
The criticism of SEC licensure requirements comes after a global survey ranked Nigeria among the countries with the leading crypto awareness worldwide. Also, the Chainalysis cryptocurrency report for 2023 ranked Nigeria in second position in digital assets adoption from a list of 154 countries.
Ophi indicates that the high crypto adoption rates fueled hopes that it will attract increased investment from foreigners. Nonetheless, the Africa’s largest economy struggles with low investment rates
. Ophi attributes the low numbers to the move by the country’s central bank to lift the ban that barred financial institutions from supporting the crypto exchanges course.