Introduction:- Cryptocurrencies, blockchain-based payments,tokenized assets, and digital securities remain one of the most disruptive innovations in the world of 21st century finance, especially in Nigeria where it led to unprecedented levels of financial inclusion and truly borderless transactions, creating new business opportunities & possibilities as well as pushing the boundaries of decentralized banking & finance.
But these innovations also came with unprecedented levels of problems not seen in the field of compliance & financial/economic crimes , ranging from advanced methods of Terrorism-financing, the safe keeping of the financial proceeds of crime far beyond the reach of regulatory agencies, and major uninsured losses to victims of uncontrolled trading of highly volatile cryptocurrencies and tokens usually pegged to no real-world assets.
This necessitated the need for regulatory control of digital & virtual assets (including cryptocurrencies) as well as regulatory licensing & oversight of businesses engaged in digital & virtual assets services, which in Nigeria, falls under the jurisdiction of the Securities & Exchange Commission (SEC), charged by virtue of the Investments and Securities Act (ISA) 2025 & its updated SEC Rules On The Issuance, Registration & Custody Of Digital Assets 2022.
This article will be focused on highlighting:-
a). The classes of digital & virtual assets/crypto business licenses currently available in Nigeria.
b). The licensing process & requirements for these business licenses.
c). The cost & time implications of procuring these business licenses.
d). Alternative licensing options for techpreneurs seeking to engage in the business of rendering virtual & digital asset /crypto services in Nigeria.
What are the business licenses currently available for digital & virtual asset/crypto service providers in Nigeria?
The SEC currently provides the following business licenses for digital & virtual asset/crypto service providers in Nigeria:-
- a) .Digital Asset Exchange (DAX) Licenses :-
– A DAX is an online platform for the facilitation of trading in virtual and digital assets.
– A DAX is regulated by the Securities and Exchange Commission (SEC) and comes with a minimum share capital requirement of 2 (Two) Billion Naira.
b). Digital Asset Offering Provider (DAOP) Licenses :-
– DAOPs are digital platforms licensed by the SEC for the purpose of serving as a platform for digital asset offerings in the form of ICOs or Initial Coin Offerings.
– DAOPs carry a minimum share capital requirement of 1(One) Billion Naira.
c). Digital Asset Custodians (DACs) :-
– DACs are companies licensed by the SEC to be engaged in the safekeeping of digital assets invested in ICOs in a manner similar to traditional Custodian companies.They come with a share capital requirement of 2(Two) Billion Naira.
d).“VASPs” or Virtual Asset Service Providers which are defined in the guidelines as platforms that conduct of behalf of other parties :-
- a) exchanges between Cryptocurrencies and Fiat currencies;
b). exchanges between virtual assets;
c). the transfer of Virtual assets;
d). the safe-keeping of Virtual assets;
e). the provision of financial services related to an issuer’s offer or sale of a virtual asset.
This category has now been modified into an Ancillary VASP (AVASP) license, which as a license covers providers of digital asset non-custodial services such as crypto wallet services .This license category comes with a share capital requirement of 300 (Three Hundred) Million Naira.
e). Digital Asset Platform Operator (DAPO) Licenses :- This applies to businesses that own platforms for the offering & issuance of newly minted digital assets & also include token issuers themselves. This license category carries a minimum share capital requirement of 500 (Five Hundred) Million Naira.
f). Digital Asset Intermediary (DAI) Licenses:- This license applies to digital asset brokers, portfolio managers & digital investment advisors and carries a minimum share capital requirement of 500 (Five Hundred Million) Naira.
g). Real-World Assets Tokenization & Offering Platforms (RATOP) Licenses :- This license category applies to businesses involved in the tokenization of “real world” or physical assets like real estate & carries a minimum share capital requirement of 1 (One) Billion Naira.
What is the licensing process for procuring any of the licenses mentioned above?
SEC licensing for digital asset/crypto service providers in Nigeria typically involves going through 2 processes known as :-
a). The SEC Regulatory Incubator (RI) Sandbox :- For new crypto start-up businesses offering innovative blockchain-based services that require controlled testing & observation by the SEC. Admission into this sandbox typically lasts a year.
b). The Accelerated Regulatory Incubator Program (ARIP):– For crypto service businesses already in operation before the SEC 2022 rules & are just seeking formal registration with the SEC. Admission into this sandbox typically lasts up to 12(Twelve) months.
What are the eligibility & other requirements for admission into the RI and ARIP programs?
Admission into the RI and ARIP incubation programs are open to :-
a). Nigerian companies or companies licensed by an overseas securities operator (MISA registration in Europe for example). This means foreigners or foreign businesses seeking SEC licensing will have to register foreign-owned Nigerian companies with the Corporate Affairs Commission (CAC) and procure Certificates of Capital Importation (CCI). The CEO or managing director of an applicant company must be resident in Nigeria.
b). Businesses offering innovative products, solutions, technologies or services to the Nigerian capital market (the SEC regards digital assets & tokens as securities or digital interpretations of real life value or money demand similar to shares as debt instruments).
Admission requirements into the RI and ARIP include:-
a). Submitting an admission assessment form to SEC with an assessment fee of 50,000.00 Naira for the RI & 200,000.00 Naira for the ARIP.
b). Evidence of shareholders funds.
c). A 25% fidelity bond .
d). 4 (Four) sponsored individuals representing the company.
e). A processing fee of 2 million Naira (for ARIP admission only,not the RI).
f). Proof of registration with the Nigerian Financial Intelligence Unit (NFIU).
g). A letter of “no objection” from other sectoral regulators if applicable.
h). Company incorporation documents.
i). An end-to-end schematic illustration of the applicant company’s proposed business operations or product operation(especially for RI admission).
Note that with admission into the RI, the SEC has the power to issue a discretionary waiver of the rules for applicants with products that might be deemed particularly innovative.
Does this mean P2P (Peer-to-Peer) crypto trading is now illegal in Nigeria?
No,P2P trading for now hasn’t been rendered illegal by the SEC Rules yet. But facilitating P2P trading for a fee would be deemed by the SEC as running an unlicensed crypto business and can attract serious penalties.
What if I decide to run an unlicensed crypto/digital & virtual asset business under the radar without the knowledge of the SEC?
If caught, this can attract a fine of at least 10-20 Million Naira, minus the possibility of imprisonment of 5-10 years & asset forfeiture.
I’m a start-up techpreneur involved in crypto business services, but I simply can’t afford the share capital requirements required by the SEC in order to gain admission into the RI or ARIP. I’m even currently bootstrapping. What can i do as an alternative licensing measure to avoid getting into trouble with the SEC?
Start-up techpreneurs have the following alternative licensing options, but they’ll first need to consult a lawyer to determine the viability of these options, most of which are still under regulatory control:-
1). Strategic partnership with SEC-licensed crypto businesses via umbrella agreements.
2). Seeking alternative SEC licensing as digital, corporate, or individual sub-brokers or crowdfunding intermediaries (with a minimum share capital requirement of 10-200 million Naira) and then entering digital asset service partnership agreements with SEC-licensed crypto businesses.
3). Seeking more affordable Central Bank of Nigeria (CBN) licensing as payment gateways for crypto service companies focused on the facilitation of fiat payments (this carries a minimum share capital of at least 100 million Naira as prescribed by the CBN). Umbrella agreements are also possible with CBN licensing.
Emmanuel Ifeanyi Ogbuka, Esq, a lawyer and legal consultant, writes from Lagos,Nigeria.
Phone:- +2347011261897
Email:- ogbukalegal@outlook.com
***PLEASE NOTE****:- This article is strictly for informative purposes and neither constitutes legal advice nor prohibited advertising as prescribed by the Rules Of Professional Conduct For Legal Practitioners In Nigeria.