Regulatory body in Nigeria, the Securities and Exchange Commission (SEC), has issued a requirement for cryptocurrency companies to establish physical offices within the country to qualify for participation in the regulatory sandbox initiative.

Nigeria's Securities and Exchange Commission (SEC) has taken a significant step towards regulating cryptocurrencies, bringing clarity to the local digital assets scene. With the introduction of the Accelerated Regulatory Incubation Program (ARIP), crypto companies operating in Nigeria are now required to comply with a set of regulations designed to foster innovation, ensure consumer protection, and maintain market integrity.

Under the Investment and Securities Act (ISA) 2025, cryptocurrencies, including stablecoins, have been formally classified as securities, bringing them under SEC regulation. This move replaces previous regulatory ambiguity and restrictions.

The SEC has also introduced a stablecoin-specific regulatory framework, focusing on investor protection, anti-money laundering (AML), know-your-customer (KYC) compliance, maintenance of fiat reserves equivalent to token supply, and licensing requirements for issuers to operate in Nigeria.

The Accelerated Regulatory Incubation Program (ARIP) is a regulatory sandbox designed to allow compliant crypto companies, including stablecoin issuers and other Virtual Asset Service Providers (VASPs), to pilot projects under supervised conditions before full licensing.

To qualify for consideration under ARIP and eventual SEC licensing, crypto companies must be incorporated in Nigeria, have a principal resident officer in Nigeria, register with the Nigerian Financial Intelligence Unit (NFIU) for AML compliance, meet reserve requirements and compliance obligations detailed in the SEC regulatory framework, and submit an operational plan and a business model with a clear value proposition, along with provisions for investor protection.

Applicants must be actively involved in investment and securities business and either be seeking registration or have pending virtual asset-related applications with the SEC. They must also provide a sworn undertaking confirming that they and their key personnel have not been convicted of fraud, dishonesty, or other relevant offenses.

The ARIP framework aims to address regulatory gaps, facilitating the onboarding of entities seeking registration while allowing the SEC to better understand and regulate digital asset business models. This regulatory evolution positions Nigeria as a leader in African digital asset regulation, aiming to foster innovation while ensuring consumer protection.

It's important to note that commercialized Virtual Asset Service Providers (VASPs) operating trading, offering, and custody platforms without due authorization face penalties of not less than ₦20,000,000. Companies operating without SEC authorization or registration will face a penalty of not less than ₦10,000,000. Failure to comply with any of the stipulated requirements may result in a penalty of not less than ₦5,000,000 at the first instance and an additional ₦200,000 for each day of default.

This regulatory advance comes amidst uncertainties in the local digital assets scene, with Nigeria having taken a regulation-by-enforcement approach, engaging in a legal battle with crypto exchange Binance. Recently, the Central Bank of Nigeria initiated a clampdown on peer-to-peer (P2P) cryptocurrency trading, leading many crypto exchanges to discontinue P2P services to Nigeria-based users.

In December 2023, the Central Bank of Nigeria lifted its three-year prohibition on financial institutions engaging with crypto-related businesses, signalling a more permissive stance towards cryptocurrencies in the country.

In summary, Nigerian crypto companies seeking regulation under ARIP must strictly comply with SEC licensing prerequisites, including local incorporation, NFIU registration, robust AML/KYC frameworks, and adherence to stablecoin reserve rules, while participating in the SEC's incubation sandbox to pilot digital asset innovations under supervision. This regulatory evolution positions Nigeria as a leader in African digital asset regulation, aiming to foster innovation while ensuring consumer protection.

Nigeria's Securities and Exchange Commission (SEC) has classified cryptocurrencies, including stablecoins, as securities, bringing them under SEC regulation under the Investment and Securities Act (ISA) 2025.
The Accelerated Regulatory Incubation Program (ARIP) allows compliant crypto companies, such as stablecoin issuers and other Virtual Asset Service Providers (VASPs), to pilot projects under supervised conditions before obtaining full licensing.
To qualify for ARIP and eventual SEC licensing, crypto companies must meet numerous requirements, including local incorporation, registration with the Nigerian Financial Intelligence Unit (NFIU), compliance with SEC's regulatory framework, and submission of an operational plan, a business model, and investor protection provisions.
The ARIP framework aims to address regulatory gaps, facilitating the onboarding of entities seeking registration, while allowing the SEC to better understand and regulate digital asset business models, positioning Nigeria as a leader in African digital asset regulation.
Commercialized Virtual Asset Service Providers operating without due authorization in Nigeria face penalties, with penalties for operating without SEC authorization or registration ranging from ₦10,000,000 to additional fines for each day of default.

Regulatory body in Nigeria, the Securities and Exchange Commission (SEC), has issued a requirement for cryptocurrency companies to establish physical offices within the country to qualify for participation in the regulatory sandbox initiative.