Key Takeaways
- The move is part of the SEC’s Accelerated Regulatory Incubation Programme,, designed to facilitate the onboarding of VASPs in the country.
- ARIP framework aims to accelerate the registration process by providing temporary approval until the Digital Assets Rules are fully operational.
Nigeria’s Securities and Exchange Commission (SEC) has introduced a new mandate for virtual asset service providers (VASPs), requiring them to establish a physical office in Nigeria to qualify for its regulatory framework. This move is part of the SEC’s Accelerated Regulatory Incubation Programme (ARIP), designed to facilitate the onboarding of VASPs in the country.
As of June 21, 2024, entities seeking to operate under this framework must be incorporated in Nigeria and have a local office. Additionally, the CEO or managing director of these entities must reside in Nigeria. The SEC’s circular, titled “Framework On Accelerated Regulatory Incubation Program (ARIP) For The Onboarding Of Virtual Assets Service Providers (VASPs),” directs all operating and prospective VASPs to complete their application process on the SEC ePortal within 30 days.
This development coincides with the Nigerian government’s broader efforts to foster technological advancement. The National Information Technology Development Agency recently announced plans to establish research centers for emerging technologies, including artificial intelligence, the Internet of Things (IoT), and blockchain, across the country’s six geopolitical zones.
Applicants for the ARIP must be engaged in investment and securities business and either seek registration or have pending applications related to virtual assets with the SEC. The ARIP framework aims to accelerate the registration process by providing temporary approval until the Digital Assets Rules are fully operational. This interim approval allows entities to conduct business in Nigeria, offering services such as digital asset trading, exchange, custody, and transfer.
The application requirements for ARIP include a sworn statement confirming no fraud or dishonesty convictions, an operational plan, a business model with a clear value proposition, and provisions for investor protection. The processing fee is set at 2 million naira ($1,277), and applicants must provide evidence of required shareholder funds. ARIP participants are also expected to submit weekly and monthly trading statistics, quarterly financials, compliance reports, and incident reports.
Noncompliance with ARIP requirements could result in significant penalties, starting at 5 million naira ($3,194) and increasing by 200,000 naira ($128) daily for continued default. Unregistered commercial VASPs face penalties of at least 20 million naira ($12,776), while other digital investment platforms, such as crypto brokers and advisers, face fines of at least 10 million naira ($6,388).
On March 15, 2024, the SEC had proposed amendments to its rules on digital assets, including additional requirements for VASPs. These Proposed Rules extend the definition of virtual assets to include cryptocurrency, now referred to as “virtual (crypto) assets.”
