Nigerian crypto analyst Rume Ophi has expressed concerns over the Nigerian Securities Exchange Commission (SEC)’s new cryptocurrency licensing requirements. According to Ophi, these requirements could lead to a significant reduction in the number of operational local crypto exchanges in the country, favoring foreign exchanges instead.
Nigerian SEC’s new rules on digital assets
In May 2022, the Nigerian SEC released a comprehensive 54-page document titled “New Rules on Issuance, Offering Platforms and Custody of Digital Assets.” These rules were designed to provide clarity and guidelines for cryptocurrency service providers in Nigeria, as well as for the banking and financial institutions on their interaction with digital assets.
The core requirement for crypto exchanges outlined in these regulations is the need to obtain a Virtual Asset Service Provider (VASP) license from the SEC. This license comes with specific conditions, including application processing, registration fees, and other applicable charges.
Rume Ophi highlights a key concern within the crypto community in Nigeria – the steep capital requirement set by the SEC. Under the new regulations, crypto exchanges are expected to have a minimum paid-up capital of $556,620 (N500 million naira).
This substantial financial burden could prove challenging for many local exchanges, potentially forcing them out of the market.
Ophi argues that these capital requirements may ultimately lead to a situation where predominantly foreign exchanges can afford to operate within Nigeria. This outcome could disrupt the balance of the local crypto industry, with implications for both businesses and investors.
Nigeria’s crypto awareness and adoption
It’s worth noting that Nigeria has been recognized for its high levels of crypto awareness and adoption. In a global survey involving respondents from 15 countries, Nigeria emerged as having one of the most cryptocurrency-aware populations worldwide. Despite being the largest economy in Africa, the country’s crypto adoption rates have been impressive.
However, Ophi points out that the ban on financial institutions from servicing crypto exchanges had a negative impact on foreign crypto investment in Nigeria.
The Central Bank of Nigeria (CBN) had previously imposed restrictions on Nigerian banks facilitating cryptocurrency transactions. This move created obstacles for investors and disrupted the flow of funds into the crypto market.
The impact of CBN’s recent ban lift
The recent decision by the Central Bank of Nigeria (CBN) to lift the ban on Nigerian banks facilitating cryptocurrency transactions has been welcomed by the crypto community. Ophi believes that this change in policy will encourage more foreign crypto investment in Nigeria.
Additionally, it is expected to stimulate the employment of local talent in the emerging fields of Web3 and the broader crypto industry.
As cryptocurrency gains mainstream acceptance and becomes a focal point for innovation and job creation, the lifting of the ban is seen as a significant step in the right direction. It aligns with the growing global trend of embracing digital assets and blockchain technology.