Nigeria’s financial regulators are finally moving forward with licensing virtual asset providers, including those dealing in cryptocurrencies. This is a calculated move to capitalize on the exploding crypto market in the country while trying to keep a lid on the chaos.
The Abuja-based Securities and Exchange Commission (SEC) is set to issue its first licenses for digital service providers and tokenized assets this month.
This aligns with global trends, but it’s more about Nigeria looking out for its own interests as the naira continues to plummet, losing about 70% of its value against the dollar since June last year.
The decision to regulate comes after years of authorities trying to curb crypto’s influence, often using heavy-handed tactics that have frustrated many in the tech-savvy youth demographic.
The country has one of the highest rates of crypto adoption globally. What’s new is the government’s decision to stop being so damn uptight about it and start figuring out how to get a slice of the pie.
Director-General Emomotimi Agama of the SEC hinted that the first set of licenses would be handed out sooner than expected. He said that:
“Being a crypto enthusiast and fintech enthusiast, I can tell you without doubt that this is going to happen sooner than you think. We must support the youths of this country to be able to achieve the benefit that is accruable in fintech. The market size is huge and it is growing.”
Now, this agreement to regulation didn’t just happen overnight. It’s been brewing for a while, especially after the 2022 crypto market crash that saw prices plummet, leading to a string of bankruptcies and scandals worldwide.
Nigeria is not alone in trying to tame the wild west of digital currencies. The European Union, South Africa, and Botswana have also taken steps to create some order in this chaotic space.
But Nigeria has always had a love-hate relationship with crypto. On one hand, it’s seen as a way to undermine the local currency—the naira. On the other, it’s a way for young Nigerians to escape the financial restrictions of the traditional banking system.
The Nigerian government has been skittish about crypto for a while now, especially after the Central Bank of Nigeria (CBN) banned banks from facilitating crypto transactions.
The government’s reasoning? They were worried about traders on digital platforms manipulating the exchange rate of the naira. That’s when things started to get serious.
Earlier this year, the government took things up a notch by blocking access to Binance, the world’s largest crypto exchange. They also went after executives, accusing them of illicit activities and speculating on the naira, which allegedly deprived Nigeria of tax revenue and further weakened the currency.
But guess what? Banning Binance didn’t stop Nigerians from trading crypto. It just pushed them to other platforms like Bitkoin Africa Inc. and Quidax.
According to Agama, young Nigerians have found alternative ways to continue their Bitcoin transactions despite the government’s crackdown. And they’re not slowing down.
In fact, the volume of crypto transactions in Nigeria jumped by 9% to $56.7 billion in June 2023, compared to the previous year. Agama even mentioned that this figure is just the “tip of the iceberg,” as many transactions go unreported.
Despite the enthusiasm, the SEC isn’t ready to let the crypto market run wild. Agama said they want to create a platform where people can trade these assets legally and transparently.
“What we will not encourage is the use of cryptocurrency to manipulate our currency.”
This is where the new licensing comes into play. The goal is to provide a formal structure for crypto trading, so it’s easier for the government to track and regulate the industry.
President Bola Ahmed Tinubu has also been vocal about his stance on crypto. During his campaign, Tinubu made some promises, including the legalization of cryptocurrencies and the promotion of blockchain technology within Nigeria’s banking and finance sectors.
He saw the potential for these technologies to strengthen Nigeria’s economy, which is why he proposed the creation of an advisory committee to review the regulatory environment and suggest changes to encourage adoption.
But since taking office, Tinubu’s administration has sent mixed signals. While there have been positive steps, like the SEC’s new regulations for digital assets and lifting the ban on banks operating crypto accounts, there have also been actions that have left the crypto community scratching their heads.
For instance, the government introduced a “cryptocurrency tax” as part of the Finance Act 2023, which slapped a capital gains tax on profits from digital assets.
This was seen by many as a sign that the government was finally accepting cryptocurrencies, but it also raised concerns about how this would impact the already volatile market.
The confusion doesn’t stop there. Despite Tinubu’s promises, there have been crackdowns on peer-to-peer trading and other measures that seem hostile to the crypto industry.
These actions have created mistrust among young Nigerians who are passionate about crypto. They feel like the government is speaking out of both sides of its mouth—promising support on one hand while cracking down with the other.
