Nigeria’s Securities and Exchange Commission (SEC) plans to accelerate the issuance of crypto licences in 2025 as part of its efforts to regulate the cryptocurrency market and protect consumers. The regulator aims to expedite approvals to address the need for clear regulations in a largely unregulated market.
Since launching the Accelerated Regulatory Incubation Programme (ARIP) in June 2024, the SEC has granted provisional licenses to two Nigerian crypto startups, Quidax and Busha. At a December 2024 workshop, the SEC indicated it would “move a lot quickly” in issuing further provisional licences in 2025, according to a person familiar with the matter.
Nigeria is an active crypto market with individuals and businesses using cryptocurrencies and stablecoins to hedge against inflation and exchange rate volatility. Yet, the lack of a clear regulatory framework creates significant uncertainty for users and investors.
A report from Busha found that nearly half of 1,500 surveyed Nigerian crypto users and non-users cited security concerns as a barrier to crypto adoption.
On centralised exchanges, one wrong click can lead to financial loss. Peer-to-peer (P2P) transfers are also risky, and new users may pay higher fees if they are not familiar with how blockchain networks work or how to minimize transaction costs.
Rug-pull scams are also prevalent, particularly with the rise of meme coins. These scams involve creators artificially inflating a token’s value before selling off their holdings, causing the price to crash and leaving buyers with losses.
“Scammers thrive the most in the crypto space; if you find ways to take advantage of those who don’t know what they’re doing, that’s where you make the most money,” said Chibunna Kingsley, a crypto trader based in Lagos. “It’s right for people to feel unsafe.”
To address these risks, crypto platforms have focused on educating users, but awareness alone isn’t enough. Regulators must play a central role in consumer protection.
“If you’re a regulator, you should be worried about consumer protection,” said Craig Stoehr, General Counsel at crypto startup Yellow Card. “More has happened in the past nine months than in the 2 years before the SEC established ARIP. They’re on the right track.”
Discussions about regulating digital assets began in September 2020 when the SEC released its first framework for crypto regulation. In 2022, the SEC took a more explicit stance by focusing on how crypto assets should be classified under securities laws. By March 2024, the regulator amended its guidelines, directing all entities offering virtual asset services to register with the Commission.
The SEC launched the ARIP in June 2024 to onboard crypto startups and operators in a sandbox-like environment. This initiative allows crypto companies to obtain provisional licences, marking a significant shift from Nigeria’s anti-crypto stance in 2021. At that time, banks avoided providing services to crypto companies due to compliance concerns.
With the ban lifted in December 2023, the Central Bank of Nigeria (CBN) has issued directives on how banks can engage with crypto startups. This collaboration has allowed companies like Quidax, Busha, and Yellow Card to gain access to banking services, although some banks remain wary.
Under the ARIP, local and foreign crypto startups—including Quidax, Busha, Yellow Card, Borderlesspay, and Bitnob—have applied for provisional licences. These companies pay a ₦200,000 fee for assessments and an additional ₦2 million in non-refundable processing fees.
“The process was thorough,” said Tobenna Igweonu, a lawyer representing Quidax. “We answered questions on the SEC’s e-portal, paid the application fee, and participated in a demo where we demonstrated how funds flow through our platform.”
During the demo sessions, SEC officials scrutinised the companies’ compliance setups, focusing on consumer protection measures and their ability to flag suspicious user accounts.
In August 2024, the SEC issued a provisional licence to Quidax, which had been engaging with the SEC even before the ARIP was announced. Quidax was the first startup to apply, allowing it to secure a provisional license ahead of others. After 12 months, Quidax is expected to obtain full licensure as a Virtual Asset Service Provider (VASP), assuming it meets the necessary regulatory requirements.
Despite progress, banks remain cautious about working with crypto companies. The CBN has yet to provide a clear stance on how financial institutions should engage with crypto startups. However, a regulatory grey area has allowed these startups to access banking services, although they often disguise themselves as “investment” companies to avoid drawing attention to their crypto operations.
“The challenge is that banks don’t directly associate with crypto companies,” a banker who asked not to be named discussing a sensitive issue told . “They simply work with them as investment companies.”
As the SEC moves towards full regulation of the crypto market, clearer guidelines could boost confidence among institutional investors and banks, encouraging them to explore crypto opportunities. A transparent regulatory environment would also make it easier to tax crypto transactions, a proposal that Nigeria has been exploring since 2022.
“The ARIP remains one of the boldest efforts by any regulator in Africa to oversee the crypto sector,” said Chuta Chimezie, a member of the Nigerian Blockchain Committee.
While the SEC has made strides in regulating crypto, it must strike a balance between fostering innovation and ensuring compliance. Over-regulation could stifle growth in the sector and drive businesses to other jurisdictions with more favorable environments. The SEC has indicated that it aims to create a balanced framework that encourages growth while protecting consumers, but how this balance will be achieved remains an open question.
