The Securities and Exchange Commission (SEC) of Nigeria has recently introduced new regulations for Virtual Asset Service Providers (VASPs) operating in the country. These regulations aim to ensure closer regulatory supervision and support for the local market development in the crypto industry.
One of the key requirements under the new regulatory framework is that VASPs must establish a local office in Nigeria. This physical presence is essential for regulatory oversight and customer interaction. Additionally, fintech entrepreneurs, especially those dealing with virtual assets, are required to have leadership roles within their firms, including CEOs.
These regulations come in response to the challenges faced by Nigeria in maintaining the value of its fiat currency, the Naira, amidst the increasing adoption of cryptocurrencies in the country. The new rules are designed to address these issues and promote a more secure and transparent crypto market in Nigeria.
In order to qualify for a license, VASPs must meet certain pre-qualification requirements. These include having an office in Nigeria, using innovative technology to offer financial services, and being prepared to start operations with live customers. The products or services offered by VASPs must solve a specific problem or provide significant benefits to consumers or the industry.
Operational requirements for VASPs include demonstrating expertise in financial services and technology, providing full information to clients, and complying with all relevant laws and regulations. Additionally, firms must adhere to Anti-Money Laundering and Counter-Terrorism Financing requirements, with clear procedures for holding and controlling client assets.
During the regulatory incubation period, VASPs are subject to certain restrictions, such as not guaranteeing returns in financial promotions and a limit on the number of clients they can onboard. The incubation period lasts for one year, after which firms must apply for full registration or cease operations if they do not meet the eligibility criteria.
The SEC has the authority to terminate a firm’s participation in the regulatory incubation process if it no longer meets the eligibility criteria, breaches any restrictions, deviates from its implementation plan, or fails to apply for registration or submit a notice of discontinuance after one year. Applicants are required to submit a detailed implementation plan outlining their business model, objectives, risk management framework, and communication strategies with customers.
Overall, these new regulations aim to bring about a more secure and transparent crypto market in Nigeria while promoting the development of local fintech entrepreneurs. By establishing local offices and ensuring strong leadership within firms, the SEC hopes to create a more robust regulatory framework for the crypto industry in the country.