The adoption of cryptocurrency has gained significant traction in Nigeria over the years, serving as a store of value to hedge against inflation and as an investment tool for wealth accumulation. Additionally, it has become a popular medium for international transfers, allowing individuals to send cryptocurrency to family members in Nigeria, who then convert it to local currency.
Despite its popularity, the use of cryptocurrency has not been without challenges. In this newsletter, we will examine cryptocurrency regulation in Nigeria and outline the steps businesses must take to operate compliantly within the country.
Crypto Regulation in Nigeria
In 2021, the Central Bank of Nigeria (CBN) issued a directive instructing banks to cease facilitating payments for cryptocurrency exchanges and to close the accounts of individuals and entities engaging in or operating crypto exchanges. According to the CBN, this directive aimed to mitigate the risks of money laundering and terrorism financing associated with cryptocurrency transactions.
In December 2023, the CBN partially reversed its stance by issuing the “Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers” (the “Guidelines”). These Guidelines allowed cryptocurrency trading companies—such as crypto exchanges, wallets, and digital currency creators—to open bank accounts, provided they met specific conditions, including obtaining a license from the Securities and Exchange Commission (SEC).
Currently, the SEC is the primary regulatory body overseeing cryptocurrency and other digital assets in Nigeria. These Guidelines followed the SEC’s release of rules on the issuance and custody of digital assets in May 2022, which established a framework for the registration and operation of Virtual Asset Service Providers (VASPs), including crypto companies.
In June 2024, the SEC introduced a framework for the Accelerated Regulatory Incubation Program (ARIP), which expedited the registration process for VASPs. Following this announcement, in August 2024, the SEC granted licenses to two crypto exchanges. These developments indicate that cryptocurrency companies can operate in Nigeria, provided they comply with the applicable regulatory requirements.
Steps to Consider When Setting Up a Crypto Company
1. Company Registration: Crypto companies must register with the Corporate Affairs Commission (CAC) as a preliminary requirement to operate in Nigeria. The company must be incorporated with a minimum paid-up share capital of [amount] million.
2. SEC Registration: To operate a crypto company in Nigeria, registration with the SEC is mandatory. Currently, registration is conducted through the ARIP program. Interested parties must submit an expression of interest to the SEC, followed by a detailed application that includes documents such as an operational plan, business model, company documents, and other requirements specified in the SEC Rules. Upon approval, the SEC will issue an Approval in Principle, allowing the entity to operate as a regulated crypto entity. It is essential to note that crypto companies must be incorporated and have a physical office in Nigeria, and the Chief Executive Officer or Managing Director must be a resident in Nigeria.
3. Capital Importation and Bank Accounts : If the funding for the crypto company comes from outside Nigeria, it must be brought in through authorized dealers (commercial banks). A Certificate of Capital Importation (CCI) is important, as it enables investors to repatriate capital, dividends, and profits earned from the company at the official foreign exchange market rates in a freely convertible currency, subject to applicable taxes. Crypto companies can also open accounts in commercial banks for settlement purposes; however, these accounts will not bear interest, and companies are not permitted to withdraw funds in cash. Withdrawals are limited to transfers to other bank accounts or the use of a manager’s cheque.
4. Immigration Considerations : If a crypto company employs foreign staff, it must obtain an Expatriate Quota from the Ministry of Interior. This quota allows the company to employ foreigners. Additionally, the company must secure a Combined Expatriate Residence Permit and Aliens Card (CERPAC) from the Immigration Service, which allows expatriate staff to live and work in Nigeria. A CERPAC is mandatory if the MD/CEO is a foreigner, as the SEC requires this individual to reside in Nigeria.
5. Intellectual Property (IP) Registration : It is crucial for crypto companies to protect their intellectual property (IP) by registering it in Nigeria. This may include registering their brand name with Nigeria’s trademarks registry or patenting blockchain technology that powers their crypto assets or inventions that complement the use of crypto. Protecting IP is vital, as it forms part of a company’s assets and enhances its valuation and goodwill.
6. Registration with the National Office for Technology Acquisition and Promotion (NOTAP): This is an important step for crypto companies to comply with local regulations.
By adhering to these guidelines and requirements, cryptocurrency companies can successfully navigate the regulatory landscape in Nigeria.
