Nigerian SEC approves first cryptocurrency exchange: Quidax receives provisional license

The Nigerian cryptocurrency market now houses the nation’s first cryptocurrency exchange following approval from the Securities and Exchange Commission (SEC).

According to multiple reports, the Nigerian SEC has issued a provisional operating license to Quidax, a Lagos-based cryptocurrency exchange. This is also the first cryptocurrency-focused initiative undertaken by the newly inaugurated SEC board that was approved by President Bola Tinubu in April 2024.

First steps toward crypto regulations

The board is headed by SEC chairman Mairiga Katuka and crypto-friendly Director General Emomotimi Agama, who spearheaded the amendment of rules related to Digital Asset Issuance, offering platforms, exchange, and custody. 

In June 2024, the SEC announced the changes, introducing a new compliance program for virtual asset service providers (VASPs), the Accelerated Regulatory Incubation Programme (ARIP). The program was introduced to streamline the licensing process and help VASPs meet the compliance requirements.

The provision grants applicants an “Approval in Principle” that allows VASPs to start operations legally while the final registration is being processed. As such, businesses get the time to understand and comply with the regulatory framework before becoming fully operational.

Similar steps have been taken by regulators in Hong Kong, as the nation’s securities watchdog has designated the “deemed to be licensed” status to crypto service providers seeking licenses to operate in the region. 

With the provisional license, Quidax will be able to avail services from licensed banks and financial service providers in Nigeria. However, the exchange would still require approval from the country’s central bank.

Buchi Okoro, the exchange’s founder, views the approval as more of a cautious approach rather than a “shift” in the commission’s stance towards the cryptocurrency sector. The approval suggests that the government is “open to innovation” and wants to “ build trust in the budding crypto ecosystem,” he added.

SEC’s stance toward crypto

Historically, the SEC and other regulators have issued warnings against the crypto sector. A 2023 circular from the SEC specifically highlighted cryptocurrency exchange Binance and urged Nigerians to avoid engaging with platforms that aren’t registered with the regulator. The exchange was also warned to “stop soliciting Nigerian investors in any form.”

Subsequently, a year later, the SEC arrested and detained two Binance executives on tax evasion and money laundering charges.

The SEC’s cautious approach is reflected in the stringent licensing requirements, including strict adherence to Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations. VASPs must also implement thorough Know Your Customer (KYC) procedures, conduct ongoing due diligence, and submit Suspicious Transaction Reports (STRs) to ensure the financial system’s integrity.

Further, VASPs must maintain a minimum paid-up capital of 500 million naira (approximately $556,620) and secure a fidelity insurance bond covering at least 25% of this amount. 

As previously reported by Invezz, Agama teased the issuance of the first crypto license a week earlier while acknowledging the country’s growing appetite for crypto. He also labeled himself a crypto enthusiast and added that the crackdown on Binance has directed the nation’s youth towards domestic platforms like Quidax.

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