Nigeria: SEC Mandates Nigerian Offices for Virtual Asset Companies Under New Regulation

In a circular dated June 21, 2024, titled “Framework On Accelerated Regulatory Incubation Program (ARIP) For The Onboarding Of Virtual Assets Service Providers (VASPs),” the Securities and Exchange Commission (SEC) has mandated all potential and existing VASPs, including crypto brokers and dealers, to visit the SEC ePortal and complete the application process within 30 days of the circular’s date.

Although the rules on Digital Assets Issuance, Offering Platforms, Exchange, and Custody are currently undergoing amendment, the SEC states that VASPs must comply with the ARIP framework for now.

The SEC, a federal government agency responsible for regulating and developing the Nigerian Capital Market, plans to use the ARIP to fast-track the onboarding of entities that have filed their applications with the Commission and prospective applicants seeking registration. Under the ARIP, “qualified entities” can obtain approval in principle from the SEC, pending the operational status of the Digital Assets Rules.

The framework applies to VASPs and token issuers conducting business in Nigeria or providing services to Nigerians. To apply for the ARIP, companies must be incorporated and have an office in Nigeria, with their Chief Executive Officer (CEO), Managing Director (MD), or equivalent resident in Nigeria. Additionally, they must be active in the investments and securities business and plan to register or have already filed virtual asset-related applications with the Commission.

Entities seeking to join the ARIP must submit an affidavit confirming that the owner or firm has not been convicted of fraud within or outside the country and pay a fixed processing fee of ₦2 million. After approval, ARIP participants are required to submit weekly and monthly trading statistics, quarterly financials, and compliance reports to ensure adherence to the Commission’s regulations. They will also be subject to the SEC’s onsite and off-site inspections, audits, and monitoring.

The SEC notes that all ARIP participants who fail to comply with its requirements will face fines of at least ₦5,000,000 for the first violation and ₦200,000 for each subsequent day of non-compliance. VASPs operating without SEC authority will be fined ₦20 million and may also face suspension from the capital market.