Nigeria’s VASP licensing fees are ‘economically unrealistic,’ stakeholders say

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While Nigeria’s move toward legally recognizing and licensing digital asset firms is a great leap for the industry, the prohibitive fees are unrealistic for the local players, one analyst says.

Nigeria’s Securities and Exchange Commission (SEC) published its proposed rules for virtual asset service providers (VASPs) in mid-2022. The rules included licensing fees, capital requirements, operational guidelines and rules for token issuance, DAOs and other sectors within the industry.

While they have been around for close to two years, these guidelines came into sharper focus recently after the Central Bank of Nigeria (CBN) lifted the banking ban on VASPs. CoinGeek reported that this has pushed Nigerian digital asset firms to start applying for licenses with the securities watchdog.

However, local analyst Rume Ophi said the fees and capital requirements in the SEC’s guidelines are prohibitive and will end up pushing local players out of the market.

In its proposed rules, the SEC states, “For the [digital asset exchanges], the Rules further stipulate that they must have a minimum paid up capital of N500,000,000 (Five Hundred Million Naira) and a current Fidelity Insurance Bond covering at least 25% of the stipulated minimum paid up capital.”

According to Ophi, this requirement is unrealistic for local exchanges and doesn’t reflect the economic reality of the Nigerian VASPs.

Other experts concur; Nigerian Web3 lawyer Kue Barinor Paul believes that the high fees will leave indigenous exchanges with two options—merge with rivals or exit the market. Either way, it will hand the advantage to global players who can manage to pay the fees.

High licensing fees have been prohibitive in other African countries. In South Africa, nearly two dozen applicants for the country’s VASP licenses withdrew their licenses, citing the high fees. Without the license, these companies can no longer serve South African investors, giving the major global players an advantage.

In contrast, Asian countries have been pushing to boost the prospects of local exchanges. In India, a crackdown on offshore exchanges has seen Apple (NASDAQ: AAPL) and
Google (NASDAQ: GOOGL) delist the mobile apps of global players like Binance and Kraken, with local exchanges recording a consequent spike in volume.

Africa: A region of opportunities for blockchain adoption