Both the Blockchain Industry Coordinating Committee of Nigeria (BICCoN) and the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN) welcome the Securities and Exchange Commission (SEC Nigeria) for approving in principle seven (7) operators in the digital assets and digital investments sector in the country.
An “Approval in Principle”, according to SEC Nigeria, means “preliminary authorization given to eligible applicants to operate within the confines of the ARIP pending final registration by the Commission.” This means that no operator has a license yet. License only applies after final registration with SEC Nigeria. Meanwhile, the 7 eligible applicants with preliminary authorization are Busha Digital Limited and Quidax Technologies Limited (Digital Asset Exchanges), Trovotech Limited, Wrapped CBDC Limited, Housing Exchange NG. Limited, Dream City Capital (Digital Asset Offering Platforms), and Blockvault Custodian Limited (Digital Asset Custodian).
Both BICCoN and SiBAN commended SEC Nigeria for introducing an incubation program that promotes regulatory compliance without inhibiting innovation.
Read also: Nigeria’s SEC issues ‘Approvals-in-Principle’ to digital assets exchange firms.
BICCoN: SEC Nigeria’s ARIP is a “groundbreaking decision” and a landmark move; urges the CBN to follow suit.
BICCoN, in a press statement dated 31 August 2024 and signed by Lucky Uwakwe (Chairman) and Paul Barino Kue (Publicity Secretary), applauded SEC Nigeria for what it described as a “groundbreaking decision” and “a landmark move” that “marks a watershed moment for Nigeria’s burgeoning digital asset industry, signalling a new era of regulatory support and innovation.”
A private-sector body of stakeholders founded in January 2021, BICCoN believes that SEC Nigeria’s Accelerated Regulatory Incubation Program (ARIP) “has demonstrated its potential as a viable initiative”.
“By providing a clear pathway for Digital Assets Service Providers to offer their services and products to the Nigerian market, the SEC has reignited faith in the country’s ecosystem. This forward-thinking approach is expected to catalyze a surge of confidence among digital asset service providers, encouraging them to enter the market with the assurance of a supportive regulatory environment”, states BICCoN.
BICCoN is convinced that “Under the leadership of Mr. Timi Agama, as DG of SEC, the SEC is setting a commendable precedent that balances innovation with prudent oversight as BICCoN has always advocated. The ARIP, in conjunction with the broader Regulatory Incubation (RI) Program, exemplifies a nuanced approach to fostering technological advancement while maintaining robust consumer protections.”
Calling for continued collaboration between industry players and regulators, BICCoN urges “other regulatory bodies, particularly the Central Bank of Nigeria (CBN), to follow suit with this progressive approach” adopted by SEC Nigeria. BICCoN did not however state precisely what it expects the CBN to do on its part.
In December 2023, the CBN lifted the crypto restriction in Nigeria’s banking and financial system. In the circular announcing this, the CBN required, amongst other things, that VASPs must obtain SEC Nigeria’s license or approval before they can be permitted to open and operate bank accounts in the country. From the information available to us, banks and other financial institutions have not started onboarding VASPs.
It is not clear, at the time of writing, if the VASPs and digital assets investments platforms (DISPs) who obtained approvals-in-principle from SEC Nigeria are now qualified to open and operate bank accounts. Neither the CBN nor SEC Nigeria has made their stance known on this.
Read also: Finally, ‘crypto ban’ in Nigeria lifted by the CBN
Regardless, BICCoN envisions that SEC Nigeria’s accelerated regulatory incubation initiative would be “a catalyst for broader economic development”, as it “has the potential to unlock new opportunities across various sectors, fostering job creation, technological advancement, and financial inclusion.”
BICCoN coordinates the blockchain industry to promote safer adoption and better policy and regulation, ensuring collaboration amongst operators on the one hand and between operators and regulators and the government on the other hand. As a coordinating committee, BICCoN has representatives drawn from Blockchain Nigeria User Group (BNUG), Cryptography Development Initiative of Nigeria (CDIN), SiBAN, and select independent industry stakeholders.
SIBAN: SEC Nigeria’s new regulatory initiative is “forward-thinking”; Need for “improved transparency” around the number of applications received, timelines, and opening date for new applications
Similarly, in a separate public statement published 2 September 2024 signed by Toritseju Kaka and Ifeoma Ben, the Chairman and Secretary of the Caretaker Committee of SiBAN, SiBAN commended SEC Nigeria for paving the way for trust, innovation, and growth in Nigeria’s digital asset sector.
By its “recent granting of ‘Approval-in-Principle’ to two digital asset exchanges under the Accelerated Regulatory Incubation Program (ARIP) and the admission of five firms into the Regulatory Incubation (RI) Program, states SiBAN, SEC Nigeria has made a “progressive move” that would “help Nigeria position itself as a leader in the digital asset space in Africa, providing a clearer and more robust regulatory framework that balances innovation with investor protection.”
SiBAN welcomes ARIP as a regulatory “sandbox” that will enable the SEC to admit “innovative digital products to be tested under supervision, ensuring both consumer safety and market integrity.”
In the words of Mr. Kaka, “This initiative is a testament to the SEC’s forward-thinking approach to regulation. By creating a structured path for compliance, the SEC is not only protecting investors but also fostering a healthy and innovative digital economy.” However, for improved transparency in the ARIP in accordance with global best practices, SiBAN urged SEC Nigeria to make available to the public more information about the applications so far and how and when subsequent applications may be made.
“We understand, from the SEC’s press release of August 29 2024, that apart from the entities that received Approvals-in-Principle, other applications received by the SEC are undergoing assessment and would be granted Approval-in-Principle on a case-by-case basis as they meet all SEC requirements. For improved transparency, and consistent with global best practices, the SEC may consider stating the number of applications it received in the current cohort and also indicate when the next cohort will be opened for applications.”
Meanwhile, SiBAN has also encouraged industry players, local and foreign, to embrace the new regulatory frameworks by taking advantage of the ARIP sandbox.
Read also: FIRS commends KuCoin on 7.5% VAT on Nigerian crypto traders.
Looking forward from here, what next?
Since ARIP applications for the current cohort closed on 20 July 2024, SEC Nigeria is expected to reopen applications soon. As this is one of the areas SiBAN has asked SEC Nigeria to look into, we shall be following developments in this regard.
Also, although the CBN has issued guidelines that regulate the opening and operation of bank accounts for VASPs in Nigeria, it is not yet clear if the CBN will eventually introduce CBN-approved licenses for VASPs that strictly offer financial services that do not fall under the statutory purview of SEC Nigeria. Are all VASPs, regardless, required to obtain SEC’s license, or a letter-of-no-objection?
Moreover, it is not clear whether SEC Nigeria intends to respond to all the ARIP applications it has received i.e the applications submitted to SEC Nigeria before the closing date. At the time of writing, we confirm that while some applicants have received acknowledgement receipts from SEC Nigeria, other applicants have not, or yet to. Particularly following SEC Nigeria’s press statement announcing preliminary approvals, applicants who have not received any acknowledgement receipt feel estranged. To reinforce confidence and trust in the ARIP process, SEC Nigeria may need to look into this situation.
Lastly, will SEC Nigeria, following its newly introduced regulatory regime, call on the relevant Nigerian authorities to review the months-long blacklisting of VASPs in Nigeria’s cyberspace? With both crypto and VASPs legally recognized in the country’s capital market today—especially at a time when the Renewed Hope agenda of the Bola Ahmed Tinubu administration encourages foreign direct investments (FDIs)—the regulator of the capital market is expected to help address the various issues that are currently affecting trust and confidence in Nigeria’s virtual assets landscape.
