Skip to content Skip to sidebar Skip to footer

Group Urges Nigerian Regulators to Rethink Approach to VASPs

By Jude Ayua

Following media reports of the Nigerian government’s order on 22 February 2024 to telecommunications companies (telcos) and other internet service providers (ISPs) in the country to block access to virtual assets trading platforms, the Blockchain Industry Coordinating Committee of Nigeria (BICCoN) on 3 March 2024, issued a press statement urging the government to reconsider its stance. 

BICCoN has proposed that the Nigerian government should adopt a “forward-thinking,” “risk-based” approach to regulation of these platforms. The statement addresses six salient issues, including:

  • The government’s order and the detention of two foreign Binance executives by the National Security Advisor (NSA) on 28 February 2024;
  • The “over 26 billion USD” alleged by the CBN to have been channeled through Binance in the last one year;
  • The 10 billion USD reportedly imposed by the Nigerian government over Binance’s alleged illicit activities in the country;
  • The blockchain industry’s self-regulatory approach for consumer protection, investor safety, and national interest; and lastly, 
  • The group’s commitment as industry stakeholders for a dialogue with the CBN, SEC, NSA, and other relevant agencies in Nigeria.

First, on the order by the Nigerian government to telcos and ISPs in the country to block access to virtual assets traders’ websites, BICCoN’s position, in its press release, is “that while the activities of virtual asset service providers (VASPs) may present risks to our financial system, proper regulation and enforcement is a more efficient and effective way to safeguard the financial system and secure the economy in the long run.” The group added that such an action, considering the manner it was done—“overnight,” is not in the benefit of Nigeria. They further state that it “cannot and will not help build the much-needed trust and confidence in the financial system.” BICCoN therefore appeals to the Federal Government “to reconsider its stance and possibly review its decision by directly engaging VASPs in the country towards adopting a more collaborative and transparent approach…”

It is crucial for the government to realize—and if they have already, to demonstrate it—that restrictions, instead of proper regulation, cannot empower them to adequately oversee and exert control over the financial sector, especially as relates to Blockchain and FinTech. Past  occurrences—such as the Central Bank of Nigeria (CBN)’s 2021 restriction on banks and other financial institutions to facilitate cryptocurrency transactions in Nigeria—have shown that technology cannot be restricted by harsh policies. Conversely, it creates room for innovative strategies by affected parties to evade such restrictions and regulators’ undue control. This suggests, the more the government restricts technology and innovation, the less control they have over it.

Invoking fundamental principles of governance and rights of citizens, BICCoN argued in the press release that “denying citizens access to websites that have not been criminalized by any legislative instrument is simply undemocratic and unconstitutional.” By this, they claim that since there is no Nigerian legislation proscribing the offer and patronage of the services of the affected virtual assets traders, the government’s action is not only unlawful, but also amounts to an infringement on the rights of citizens.

Second, with regards to the detention of two foreign Binance executives by the NSA, BICCoN acknowledged the government’s powers to act in the interest of the economy, including arresting, prosecuting, and sanctioning, among other actions against offenders, but emphasized the need for the NSA and other relevant law enforcement agencies to adhere to the rule of law and observe due process: “In carrying out their statutory duties, we urge the NSA and the law enforcement agencies to observe the rule of law and due process in order to safeguard the integrity of the process,” the group stated in its press release.

On the other hand, BICCoN urged Binance—and other VASPs in Nigeria—to be in full compliance with the applicable laws and regulations in the country. They further advised that “Binance must demonstrate good faith. Particularly as a major player in the virtual assets industry, Binance should address the issues and ensure that it resolves all matters.”

Indeed, it is important to emphasize the fact that VASPs on their part should comply to be in the delightful book of regulators to avoid situations like this. However, it must be noted that for VASPs to comply, there must be regulations on ground. In Nigeria, among the challenges the Blockchain and FinTech industries have faced are the regulatory uncertainty and a noticeable lack of political will to drive effective and efficient policy implementation. This is an area the government of Nigeria and similar jurisdictions must improve in.

The fourth issue BICCoN sought to address in its press release is the “over 26 billion USD disclosed by the CBN to have been channeled through Binance in the last one year.” The group observed that “the (public) impression that $26 billion is untraceable or has disappeared because it is related to virtual assets is untenable. We believe that what the CBN Governor was trying to point out is that the huge funds did not pass through the traditional channels where the CBN has direct supervision,” and advised, “If Nigeria is able to address this, we believe that the CBN will not find itself in a position where tracing $26 billion on a centralized exchange is a major challenge.” 

It is worth noting that Nigerian regulators need to seek sustainable solutions to address its Forex challenges. The Central Bank in particular should be able to explain why it has been difficult for citizens to conduct Forex transactions through traditional banking channels, thus resorting to virtual assets trading platforms. Nigeria needs to improve the traditional banking channels to make them more accessible and dependable, while also integrating the virtual assets as an alternative or complementary window.

Lastly, regarding the reported statement credited to the Special Adviser on Information and Strategy to the President, Bayo Onanuga, BICCoN stated that they “acknowledge that the Nigerian Government, through its relevant agencies, has the authority to impose fines under applicable laws and regulations.” However, in their view, since the statement has been effectively denied, “it need not be overflogged.” Notwithstanding, they emphasized their appeal that “…the Nigerian government … adhere to the rule of law and due process, especially considering that the actions of the Nigerian government may directly impact foreign investments in the country.”

The press statement concludes with BICCoN’s commitment to “the blockchain industry’s self-regulatory approach for consumer protection, investor safety, and national interest.” They voiced their nontolerance for  “the use of virtual assets for any illicit activity, including money laundering, terrorism financing, fraud, and scams” and condemned “the activities of bad actors in the nascent virtual assets sector.” The group also disclosed that,

“[t]he leadership of BICCoN has decided to work closely with our member bodies to introduce and implement a Code of Conduct for VASPs in the Nigerian market. VASPs who voluntarily identify with BICCoN would be required to sign and adopt the Code of Conduct. we strongly encourage all foreign players in the Nigerian market to identify with local blockchain communities and become active participants we urge regulators to adopt a collaborative and forward-thinking approach to regulation, one that balances the need for oversight with the imperative to nurture innovation.”

While urging Nigerian regulators “to adopt a collaborative and forward-thinking approach to regulation, one that balances the need for oversight with the imperative to nurture innovation,” BICCoN also proposed three measures the government may adopt in this regard: a risk-based approach, streamlined regulatory requirements, and enabling licensing framework. These resonate with other suggestions of policy analysts, commentators, and players in the industry. For example, Infusion Lawyers’ Associate and Crypto Assets Buyer’s Policy Analyst, Jude Ayua, has proposed a rights-based approach to cryptocurrency regulation in Nigeria, and urged the government to “commit to a risk-based regulatory framework… encourage collaboration between various agencies and the public and private sectors, and acknowledge the potential benefits of cryptocurrencies while addressing issues such as fraud, money laundering, and consumer protection.”

BICCoN concluded, “as the blockchain industry’s intercommunity working group, we are available for a dialogue with the Nigerian government, regulators, law enforcement agencies, and other relevant stakeholders.” They emphasized their patriotism: “This is beyond crypto. It is about the future of our dear nation, and the trust and confidence we place on it.” It must be noted that it is not common to find private, self-regulatory groups, especially in a country where they are perceived as profit-oriented and not in the interests of the public, offering such voluntary advice as BICCoN has done. It will be beneficial to the Nigerian economy if they consider the salient issues addressed in BICCoN’s press release.

BICCoN was founded 28 January 2021 as an intercommunity working group, comprising three major blockchain bodies/communities in Nigeria: Blockchain Nigeria User Group (BNUG), Cryptography Development Initiative of Nigeria (CDIN), Stakeholders in Blockchain Technology Association of Nigeria (SiBAN), and independent stakeholders who may not yet be affiliated with any of these bodies.