The news: 

• Nigeria’s Securities and Exchange Commission (SEC) has ordered all Virtual Asset Service Providers (VASPs), including cryptocurrency companies, to establish offices in Nigeria as part of the eligibility requirement under its Accelerated Regulatory Incubation Programme (ARIP). 
• The initiative aims to accelerate VASPs’ registration and onboarding for the oncoming new Digital Assets Rules, emphasising compliance and investor protection. 
• Significant fines, among others, will be penalties for non-compliance.

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 SEC mandated all potential and existing VASPs, including crypto brokers and dealers, to visit the SEC ePortal to complete the application process within no 30 days of the date of the circular. 

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

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 to be registered with the Commission. 

Under the ARIP, “qualified entities” can obtain approval in principle from the SEC, pending when the Digital Assets Rules become operational.  

Among others, the framework applies to VASPs and token issuers that conduct business in Nigeria or provide services to Nigerians. 

To apply for the ARIP, companies must be incorporated and have an office in Nigeria, with its Chief Executive Officer (CEO), Managing Director (MD), or its equivalent shall be 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.  

Any entity seeking to come under the ARIP must submit an affidavit showing that the owner or the firm has not been convicted for fraud within or outside the country and pay a fixed processing fee of ₦2 million.   

After approval, ARIP participants are expected to submit weekly and monthly trading statistics and quarterly financials with compliance reports to ensure adherence to the Commission’s regulation, and subject to the SEC’s onsite and off-site inspection along with audit and monitoring. 

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