Crypto licensing bottlenecks stifle Nigerian exchanges 

In recent developments, Nigerian crypto analysts are rallying for a review of the virtual asset services providers (VASP) guidelines set by the Nigerian Securities and Exchange Commission (SEC). This push for reform stems from concerns that the existing framework creates obstacles for local crypto exchanges seeking licenses, potentially favoring foreign players and hindering the growth of the indigenous crypto ecosystem.   

The Call for Reform 

Prominent Nigerian crypto analyst Rume Ophi has voiced his concerns in an exclusive interview with Cointelegraph, stressing the importance of addressing the current licensing challenges faced by local exchanges. Ophi argues that the SEC’s guidelines fail to prioritize indigenous crypto exchanges, potentially leading to a dominance of international players in Nigeria’s crypto landscape. 

One major obstacle highlighted by Ophi is the stringent upfront capital requirement of 500 million naira (approximately $556,620). This financial barrier poses a significant challenge for many local exchanges, creating a scenario where foreign exchanges are better positioned to meet the licensing criteria. To address this issue, Ophi suggests that the SEC reconsider the minimum capital requirement, making it more accessible for homegrown crypto exchanges. 

Supporting Ophi’s viewpoint, Kue Barinor Paul, a Nigerian Web3 legal representative, participated in a spaces conversation hosted by Ophi. Paul proposes a potential solution involving mergers between crypto exchanges and VASPs to meet the SEC’s license requirements. He emphasizes the need to rework the license registration framework to create a level playing field for both local and foreign entities. 

The SEC’s Role and Recent Developments 

The discussion around licensing requirements gains significance in light of the SEC’s document published in May 2022, titled “New Rules on Issuance, Offering Platforms and Custody of Digital Assets.” While the document aimed to provide clarity for cryptocurrency service providers in Nigeria, critics argue that the guidelines may inadvertently favor foreign exchanges over their local counterparts. 

Ophi urges the National Assembly of Nigeria to intervene and align the SEC’s licensing requirements with the current economic realities of the country. The involvement of the legislative body is considered crucial in addressing potential disparities and fostering a regulatory environment that encourages the growth of the local crypto industry. 

Challenges in Attracting Foreign Investment 

Despite Nigeria’s position as the largest economy in Africa and boasting the second-highest level of cryptocurrency adoption globally, challenges persist in attracting foreign crypto investment. Ophi attributes this shortfall to the recent lifting of the ban on financial institutions serving crypto exchanges, suggesting that regulatory uncertainties may have impacted investor confidence. 

The Path Forward 

As the debate over SEC guidelines continues, stakeholders in the Nigerian crypto space remain hopeful that a comprehensive overhaul of the licensing framework will pave the way for a more inclusive and vibrant crypto ecosystem.

The Nigerian crypto industry stands at a crossroads, with analysts and experts urging the SEC to revisit its VASP guidelines to create a more favorable environment for local exchanges. The challenges posed by the current licensing framework, including the stringent capital requirements, have sparked a crucial dialogue on the need for reform to ensure a level playing field for both local and foreign entities.