According to Chainalysis’ 2023 Global Crypto Adoption Index, Nigeria has the world’s largest peer-to-peer cryptocurrency transaction volume, exceeding $56.7 billion between July 2022 and June 2023. This hasn’t gone unnoticed by the country’s Securities and Exchange Commission (SEC), which recently released a regulatory framework for onboarding Virtual Asset Service Providers (VASPs).
“What should I make of it?” you may ask. In this blog post, we’ll explain the new framework and show you how VASPs can comply with the new regulation.
So What’s Changing in Nigeria’s Crypto Industry?
Speaking at the 2024 Annual Conference of the Association of Capital Market Academics of Nigeria (ACMAN), Emomotimi Agama, the SEC’s Director General, disclosed his concerns around illicit activities and reported crypto scams that seriously threaten crypto use.
In his speech, he highlighted cybersecurity threats and the fact that a substantial portion of the population lacks adequate financial literacy, making them vulnerable to scams and risky investments. The anonymity associated with crypto transactions also makes it challenging for authorities to track suspicious activities.
Now, Nigeria’s new regulations address his concerns head-on. How so?
- Increased Scrutiny as the SEC will closely monitor weekly and monthly trading statistics submitted by VASPs, including exchanges, ATMs, and custodians. This will give the SEC a clearer picture of the billion-dollar Nigerian crypto market, allowing them to track trends and identify potential risks.
- Stricter Reporting, which means VASPs will now submit regular reports, including quarterly financials, compliance reports, and details of how they handle customer complaints and operational incidents. The aim is to ensure investor protection and prevent fraud.
- An Onboarding Framework has been created as The SEC has established a special program (ARIP) to facilitate a smooth onboarding process for VASPs seeking to operate legally in Nigeria.
What Does This Mean for Crypto Providers and Consumers?
The SEC’s focus on trading data and reports translates to stricter KYC (Know Your Customer) and AML (Anti-Money Laundering) practices for VASPs. In simpler terms, this means VASPs must thoroughly verify user identities, monitor transactions for suspicious activity, and immediately report any concerns to the regulator.
How does this benefit crypto users and the industry?
- In Sumsub’s 2023 Africa fraud report, Tanzania witnessed a remarkable 250% increase in crypto fraud, while Kenya experienced more than a doubling from the previous year. With this regulation, Nigeria aims to reduce such risks for its population.
- Stricter monitoring helps prevent the use of digital currencies for illegal activities. A FTC (Federal Trade Commission) report found that in 2022 alone, over $1 billion in crypto fraud losses were reported in the US.
- This regulation can streamline tax collection on crypto transactions, potentially increasing government revenue.
While some industry insiders may express concerns about overregulation, we think that the SEC’s framework will ultimately catalyze growth. A stable and well-regulated crypto market can attract new investors, drive innovation and drive the wider adoption of cryptocurrencies in Nigeria.
Seamfix is The KYC Company and Here’s How We Can Help Crypto Providers Meet These SEC’s Regulations
The new framework doesn’t have to be a hassle, if you have the right identity management solutions in place. VASPs can achieve regulatory compliance and become consumers’ go-to choice.
You don’t need to look too far. At Seamfix Limited, we specialize in KYC/AML compliance, with over 1,000+ satisfied businesses worldwide. Our solutions can help you achieve the following:
- Increase KYC Onboarding by 100% with secure and efficient digital KYC tools that simplify user verification processes, which is a key part of the new regulation.
- Reduce Fraud by up to 90% with our advanced AML/PEP Screening tool, which identifies suspicious activity in real time and alerts you immediately.
- Automate reporting and save valuable resources with our centralised dashboard, which simplifies the process of submitting data to the SEC.
Regulatory compliance doesn’t have to be complex, talk to the experts.
Contact us today for a FREE consultation, and we’ll show you how our solutions can help you adapt quickly to Nigeria’s new crypto regulations and position your VASP as a compliant and secure provider.
