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A circular released in June by the Nigerian Securities and Exchange Commission (SEC) has listed establishing an office in Nigeria as part of the eligibility requirements for companies categorised as Virtual Assets Service Providers (VASPs) in the country. Virtual assets refer to any digital representation of value like crypto that can be digitally used in transactions.&nbsp; 
According to a <a href="https://sec.gov.ng/framework-on-accelerated-regulatory-incubation-program-arip-for-the-onboarding-of-virtual-assets-service-providers-vasps/" target="_blank" rel="noopener">document</a> tagged “Framework On Accelerated Regulatory Incubation Program (ARIP)”, the agency directed all operating and prospective VASPs (including crypto brokers/dealers) to visit the SEC ePortal to complete the application process no later than 30 days from the date of the circular.&nbsp; 
Under ARIP, the SEC mandates crypto companies to establish an office in Nigeria. In addition, applying companies must be incorporated by the CAC, have an office in Nigeria and have its Chief Executive Officer living in the country.&nbsp; 
Read also: <a href="https://technext24.com/2024/07/04/kucoin-tax-crypto-transactions-nigeria/">KuCoin to start collecting 7.5% tax on crypto transactions in Nigeria from next week</a> 
Now, this ARIP framework applies to virtual asset service providers and token issuers that carry on business activities in Nigeria or offer services to Nigerian consumers including platforms that facilitate the offering, trading, exchange, custody and transfer of virtual/digital assets.&nbsp; 
<figure class="wp-block-image size-full">
 <img loading="lazy" decoding="async" width="750" height="355" src="https://technext24.com/wp-content/uploads/2022/03/Why-CBNs-Ban-on-Crypto-Could-Leave-Nigeria-in-a-Financial-Stone-Age.png" alt="New SEC framework mandates Nigerian crypto companies to have physical offices in Nigeria, others" class="wp-image-138841" srcset="https://technext24.com/wp-content/uploads/2022/03/Why-CBNs-Ban-on-Crypto-Could-Leave-Nigeria-in-a-Financial-Stone-Age.png 750w, https://technext24.com/wp-content/uploads/2022/03/Why-CBNs-Ban-on-Crypto-Could-Leave-Nigeria-in-a-Financial-Stone-Age-300x142.png 300w, https://technext24.com/wp-content/uploads/2022/03/Why-CBNs-Ban-on-Crypto-Could-Leave-Nigeria-in-a-Financial-Stone-Age-380x180.png 380w, https://technext24.com/wp-content/uploads/2022/03/Why-CBNs-Ban-on-Crypto-Could-Leave-Nigeria-in-a-Financial-Stone-Age-550x260.png 550w, https://technext24.com/wp-content/uploads/2022/03/Why-CBNs-Ban-on-Crypto-Could-Leave-Nigeria-in-a-Financial-Stone-Age-600x284.png 600w" sizes="(max-width: 750px) 100vw, 750px">
</figure> 
SEC states that while the rules on Digital Assets Issuance, Offering Platforms, Exchange and Custody are going through an amendment process, virtual assets service providers must come under the ARIP for now.&nbsp; 
This will enable qualified entities to obtain approval in principle from the Commission pending when the Digital Assets Rules become operational. 
<h5 id="more-details-about-the-secs-requirements-for-arip" class="wp-block-heading">More details about the SEC’s requirements for ARIP</h5> 
SEC is empowered by the Investments and Securities Act (ISA), 2007 to regulate and develop the Nigerian Capital Market and a part of the Act prohibits any expert or professional from carrying on any activity in the Nigerian Capital Market except when the Commission registers it. 
The criteria for application include: 
<ul> 
 <li>A sworn undertaking showing that the owner or the firm has not been convicted for fraud or dishonesty within or outside Nigeria.</li> 
 <li>An operational plan and a business model which has a clear or unique value proposition or will contribute to the overall development of the capital market.</li> 
 <li>A processing fee fixed at N2 million, applicants must supply evidence of required shareholder funds.&nbsp;</li> 
</ul> 
In line with the requirements of ARIP, VASPs are expected to submit weekly and monthly trading statistics (where applicable) to the SEC. 
They are also mandated to submit quarterly financial reports to demonstrate compliance with conditions imposed by the SEC.&nbsp; 
<figure class="wp-block-image size-full">
 <img loading="lazy" decoding="async" width="913" height="471" src="https://technext24.com/wp-content/uploads/2022/11/SEC.jpeg" alt="SEC to avoid cryptocurrency in digital asset push" class="wp-image-168216">
</figure> 
Additionally, crypto companies are required to submit key issues arising from misconduct, fraud or operational incident reports and, if any, measures taken by the Participant to address such incidents. 
Also, they are expected to submit actions or steps taken to address customer complaints, emergent risks, or other issues relevant to the Commission’s assessment of applicable regulatory requirements.&nbsp; 
Importantly, the <a href="https://sec.gov.ng/framework-on-accelerated-regulatory-incubation-program-arip-for-the-onboarding-of-virtual-assets-service-providers-vasps/" target="_blank" rel="noopener">framework</a> requires crypto companies to be subjected to the SEC’s onsite and off-site inspection, audit and monitoring. 
<h5 id="penalties-for-non-compliance" class="wp-block-heading">Penalties for non-compliance</h5> 
Participants who fail to comply with any of the stipulated requirements shall be liable to a penalty of not less than N5,000,000 (Five Million Naira) at the first instance and a further N200,000 (Two Hundred Thousand Naira, only) for every day of default. 
Also, a penalty of not less than N20,000,000 (Twenty Million Naira) shall apply to all commercialized VASPs operating trading, offering and custody platforms without due authorization or registration by the Commission.&nbsp; 
A penalty of not less than N10,000,000 (Ten Million Naira) shall immediately apply to all other digital investment platforms including crypto brokers/dealers, advisers, market makers etc. operating without due authorization or registration by the Commission. 
Also, sanctions including suspension from capital market activities shall apply to entities who fail to comply with the rules and regulations. 
<h4 id="the-state-of-crypto-regulation-in-nigeria" class="wp-block-heading">The state of crypto regulation in Nigeria&nbsp;</h4> 
Although taking a contradictory approach, Nigerian authorities seem to be more intentional about regulating the crypto industry recently. 
Yesterday, one of the popular crypto exchanges in Nigeria, KuCoin announced that it will collect a 7.5% Value-Added Tax (VAT) on transactions by users in Nigeria from next Monday. Although it is not yet clear what the source of the directive is, analysts assume that it is in compliance with requirements from Nigerian authorities.&nbsp; 
<figure class="wp-block-image size-full">
 <img loading="lazy" decoding="async" width="725" height="423" src="https://technext24.com/wp-content/uploads/2022/04/6A08DF3A-16DC-440C-B530-19CE52E17B5C.jpeg" alt="Crypto adoption in Nigeria is increasing, Kucoin says" class="wp-image-140868" srcset="https://technext24.com/wp-content/uploads/2022/04/6A08DF3A-16DC-440C-B530-19CE52E17B5C.jpeg 725w, https://technext24.com/wp-content/uploads/2022/04/6A08DF3A-16DC-440C-B530-19CE52E17B5C-300x175.jpeg 300w, https://technext24.com/wp-content/uploads/2022/04/6A08DF3A-16DC-440C-B530-19CE52E17B5C-380x222.jpeg 380w, https://technext24.com/wp-content/uploads/2022/04/6A08DF3A-16DC-440C-B530-19CE52E17B5C-550x321.jpeg 550w, https://technext24.com/wp-content/uploads/2022/04/6A08DF3A-16DC-440C-B530-19CE52E17B5C-600x350.jpeg 600w" sizes="(max-width: 725px) 100vw, 725px">
</figure> 
Read here: <a href="https://technext24.com/2024/07/04/kucoin-tax-crypto-transactions-nigeria/">KuCoin to start collecting 7.5% tax on crypto transactions in Nigeria from next week</a> 
However, the continued clampdown of crypto exchanges in the country casts a shadow over any prospect of regulation. 
The Nigerian authorities have been in a prolonged legal battle with Binance, which has led to the detainment of two of the exchange’s executives.&nbsp;

New SEC framework mandates Nigerian crypto companies to have physical offices in Nigeria, among others

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