SEC Nigeria cracks down on unregulated crypto activities: What’s next for the market?

The Securities and Exchange Commission (SEC) of Nigeria has announced its intention to initiate enforcement actions against both individuals and enterprises engaged in unregulated cryptocurrency activities. According to the report by The Cable, the Director-General of the SEC, Emomotimi Agama, conveyed this message during a recent communication with the local news agency Nairametrics on September 9.

He clarified that the SEC is determined to uphold its investor protection mandate, particularly concerning the cryptocurrency sector, stating, “We are certainly going to commence enforcement actions on anyone who wants to operate in this market without the intention of being regulated. For those that do not want to play by the books, we will not allow them to operate within our space.”

Need for a Strong Regulatory Framework to Safeguard Investors

At present, only two cryptocurrency exchanges, Busha Digital and Quidax Technologies, hold regulatory approval in Nigeria, having received provisional operating licences on 29 August 2023. While several other businesses associated with digital assets have received SEC endorsement, Busha and Quidax are uniquely positioned as the only exchanges presently under the commission’s oversight.

Ambiguity and Inconsistency in Nigeria’s Cryptocurrency Regulations

Agama highlighted that the recent licensing decisions were prompted by a significant increase in interest among young Nigerians in digital assets. He underscored the necessity for a robust regulatory framework that both safeguards investors and stimulates innovation within the sector. Moreover, the SEC’s supervisory role in the cryptocurrency space will encompass compliance with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations.

Shifts in Nigeria’s Crypto Policy and Central Bank Stance

Industry experts have noted the inconsistent and ambiguous nature of Nigeria’s cryptocurrency regulations, especially as the country has emerged as a prominent player in the global crypto market. In early 2021, the Central Bank of Nigeria (CBN) imposed a comprehensive ban on cryptocurrencies by forbidding financial institutions from engaging with crypto exchanges. However, a year later, the SEC published a regulatory framework acknowledging the legitimacy of crypto exchanges, signalling a shift in policy.

Binance Faces Regulatory Scrutiny and Market Withdrawal

As of late 2023, the CBN formally rescinded the ban on cryptocurrency transactions yet subsequently proposed new restrictions on peer-to-peer crypto exchanges involving the national currency, the Nigerian naira, projected for implementation in May 2024. Additionally, international trading platforms such as Binance have faced stringent regulatory scrutiny in Nigeria, leading to the announcement of their withdrawal from the market in March 2024. In a notable incident, Binance’s head of financial crime compliance, Mr. Tigran Gambaryan, was detained for over six months following his arrest in February 2024, as he awaited a court ruling on bail, which is anticipated in October.

SEC’s Ongoing Commitment to Investor Protection and Regulatory Compliance

Overall, while Nigeria has made strides in establishing a regulatory framework for cryptocurrencies, the SEC’s recent pronouncements highlight an ongoing commitment to enforce compliance and protect investors in an evolving financial landscape.