Nigerian regulators are set to crack down on unregistered cryptocurrency trading platforms in a bid to amp up its investor protection efforts.
According to a report from local media outlet Nairametrics, Emomotimi Agama, the Director-General of the SEC, said that actions would be taken against any business or individual offering cryptocurrency services without following regulations, adding:
For those that do not want to play by the books, we will not allow them to operate within our space.
Unregistered crypto platforms could face fines starting at 5 million Naira, with extra daily penalties for ongoing violations, as warned by the SEC.
Enforcement without stifling innovation
Agama, who is part of the newly established SEC board approved by President Bola Tinubu in April 2024, said that the SEC had received numerous applications for cryptocurrency exchanges.
However, he stressed that only those meeting the commission’s standards would be granted registration. The SEC aims to ensure that all activities within the cryptocurrency sector are closely monitored.
This approach is intended to protect investors from misinformation and fraudulent practices and prevent potential economic disruptions caused by unregulated activities.
According to Agama the SEC is committed to protecting investors, “without hindering innovation,” adding that the commission’s “primary responsibility” is “market development.”
To achieve this, the SEC has set strict licensing standards that extend beyond anti-money laundering and terrorist financing rules.
Exchanges must also implement comprehensive customer verification procedures and report suspicious activities, while also maintaining a minimum paid-up capital of 500 million naira and secure a fidelity insurance bond covering at least 25% of this amount.
Demand for crypto in Nigeria
The recent warning from the securities watchdog comes just two weeks after the Nigerian SEC issued the first provisional licenses to two local crypto exchanges, Busha Digital and Quidax Technologies, on Aug. 29.
According to the SEC’s website, these are the only two cryptocurrency exchanges officially under its supervision. However, there are still other platforms housed in Nigeria that have yet to receive the commission’s approval.
Agama has previously clarified that the decision to grant these licenses is in response to the growing interest in digital assets among Nigerians, particularly younger investors.
The growing appetite for cryptocurrencies among Nigerians has propelled the nation to become one of the fastest-growing crypto economies in the world.
Agama has said in a July statement that around 33.4% of Nigerians use cryptocurrencies, driven largely by lower remittance costs compared to traditional methods.
The SEC’s new enforcement efforts are a continuation of its strategy to regulate the industry more closely, following the lifting of the Central Bank of Nigeria’s ban last year.
In May, the regulator banned peer-to-peer cryptocurrency transactions using the Naira citing concerns over price manipulation.
Nigeria regulators have also cracked down on crypto exchange Binance, which announced its exit from Nigeria in March 2024 after allegations that the platform facilitated illegal transactions.
Subsequently, Binance’s head of crime compliance was detained and is currently locked up in the notorious Kuje prison.
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