The adoption of cryptocurrency has increased over the years in Nigeria, and it serves various purposes such as hedging against inflation, performing international money transfers, and also investing for wealth creation. Most people send funds to family members in Nigeria, who convert the asset into a local currency for daily usage.
But despite such widespread popularity, the use of cryptocurrency in Nigeria has faced several regulatory challenges. This article explores the evolving legal landscape of cryptocurrency in Nigeria and outlines the steps businesses must take to ensure compliance with the country’s regulations.
�Cryptocurrency Regulation in Nigeria
The journey of cryptocurrency regulation in Nigeria has been one that has seen quite a number of developments over the years.
2021: CBN’s Initial Ban
In February 2021, the CBN instructed all financial institutions to stop providing services for cryptocurrency exchanges and to close such accounts of entities and individuals engaged in any transactions in cryptocurrencies. The main basis argued by the apex bank was the requirement of preventing risks that might be involved with money laundering and financing terrorism.
2023: A Shift in Policy
This was somewhat relaxed in December 2023 when the CBN released Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers. These guidelines provided that cryptocurrency companies could henceforth open bank accounts, albeit cryptocurrency exchanges, wallet providers, and issuers of digital assets needed to get a license with the Securities and Exchange Commission.
SEC’s Regulatory Role
Currently, the SEC is the regulator of cryptocurrency and other digital assets in Nigeria. In May 2022, the SEC issued Rules on the Issuance and Custody of Digital Assets, a gateway that finally opened the path for the registration and operation of VASPs.
2024: Expedited Registration for VASPs
In June 2024, the SEC introduced the Accelerated Regulatory Incubation Program, which facilitated an expedited registration process for VASPs. By August 2024, two cryptocurrency exchanges had been duly licensed under the regime.
These developments serve to show that a cryptocurrency business can operate lawfully in Nigeria inasmuch as it is in compliance with applicable regulatory requirements.
How to Establish a Cryptocurrency Company in Nigeria
1. Registration with the Corporate Affairs Commission
A crypto company has to be incorporated as a company with the CAC. The paid-up minimum share capital is NGN 500 million.
- Get SEC Registration
The Company have to get registered with the SEC through ARIP by filing the expression of interest and then a full application. An operational plan, business model, and incorporation documents will form part of such an application.
Upon approval, the SEC issues an Approval in Principle, which grants the company permission to operate as a regulated entity. Of importance, the company should have a physical office in Nigeria, while the MD/CEO must be resident in this country.
- Capital Importation and Opening of Bank Account
- Foreign investors’ funds should be imported into Nigeria through licensed commercial banks, backed by a Certificate of Capital Importation. This will be used for repatriating either the profits or capital at official rates of exchange.
- Cryptocurrency companies can be permitted to open settlement accounts with commercial banks. No interest is payable on the settlement accounts, and any withdrawals are restricted to bank transfers or manager’s cheques—withdrawals in cash are not permitted.
- Address Immigration Issues
If the company wants to use foreigners in the process of carrying out its business, an Expatriate Quota must be gotten from the Ministry of Interior. Foreign workers also have to get Combined Expatriate Residence Permit and Aliens Card (CERPAC) to work and remain in Nigeria.
5. IP (Protect)
It is important that crypto businesses protect their intellectual property through the registration of trademarks, patents, or other proprietary technologies in Nigeria. The protection of IP goes a long way in protecting business assets but also enhances goodwill and company valuation.
- Register Technology Agreements with NOTAP
This includes where a company involves a foreign entity in agreements on technology transfer, such as licensing blockchain patents or management services. The firm must therefore be obliged to register these agreements with NOTAP so as to ensure the latter obtains fair practice and develops local content.
Starting a cryptocurrency business in Nigeria involves a complicated regulatory framework. In this regard, crypto companies will be able to create a legal framework for their activities by adhering to the rules set by the SEC and following all relevant requirements accordingly. The culture of compliance provides not only credibility among stakeholders but also offers long-term enabling conditions for cryptocurrency businesses to thrive in Nigeria’s vibrant market.