Nigeria demands VASPs have local offices, CEO

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Virtual assets service providers (VASPs) targeting the Nigerian market will need to have local offices, and their chief executive officer must reside in the country, according to the Securities and Exchange Commission’s (SEC) new rules.

The securities watchdog recently published an official notice revealing it had amended its VASP rules. The new framework introduced the Accelerated Regulatory Incubation Programme (ARIP), which outlines the requirements for registering VASPs. The regulator gave a 30-day deadline for all VASPs to register.

In a recent update, the agency has revealed that among the requirements for registration is a high local presence.

“Entities who can apply into the ARIP shall be incorporated and have an office in Nigeria and its Chief Executive Officer/Managing Director or its equivalent shall be resident in Nigeria,” the watchdog states.

Applicants must also be offering investment of securities services and “be seeking registration or have pending virtual asset-related applications with the Commission.”

Additionally, applicants must prove that their systems are capable of protecting user funds and pay a processing fee of N2 million ($1,280).

Registered VASPs will be subject to random onsite and offsite inspections by the agency and must submit periodic reports.

“ARIP participant shall make its premises, systems, books and records readily available to the Commission, or its officers or any person appointed by the Commission for inspection, audit and other supervisory purposes,” the agency added.

The SEC will impose a fine of not less than N5 million ($3,200) for the first violation, and $130 for every day of default. VASPs found to be operating without registering under the new framework will face $13,000 in fines.

Fresh new taxes despite regulatory ambiguity

While the VASPs face a new registration framework, the traders are facing new taxes. KuCoin exchange became the first in the country to impose a new 7.5% tax on traders, citing new regulations.

“We are writing to inform you of an important regulatory update that impacts our users from the Republic of Nigeria. Starting from July 8 2024, we will begin collecting a Value-Added Tax (“VAT”) at a rate of 7.5 per cent on transaction fees in each trade for users whose KYC information is registered in Nigeria,” the exchange wrote its users.

Despite the new taxes, KuCoin is one of several Nigerian exchanges which suspended some of its services, such as P2P trading, after a rampant crackdown by the government. Nigeria has yet to offer guidance on P2P services, affecting millions of traders—the country ranked first globally last year for P2P exchange trade volume in a Chainalysis study.

Despite the crackdown, regulatory ambiguity and arrests of some crypto leaders, the government expects the industry to keep growing. Emomotimi Agama, the new SEC head who many believed would push pro-crypto agendas when he took over, recently said that at least one in three Nigerians own crypto.

“The country’s crypto market is estimated to be worth over $400 million, with a significant portion of the population involved in cryptocurrency trading and transactions,” Agama stated in a press conference on Friday.

However, he acknowledged that the lack of a proper regulatory structure is hurting the industry. This uncertainty “can deter both investors and innovators.”

Nigeria’s legal battle with Binance has been the highlight of its digital asset crackdown this year. On Friday, a central bank official testified in court that the regulator hadn’t issued Binance any license and that the exchange was operating illegally.

The trial of Binance’s incarcerated official Tigran Gambaryan, which has attracted criticism from American senators, was adjourned to July 16.

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