In a significant move for Nigeria’s burgeoning cryptocurrency industry, the Securities and Exchange Commission (SEC) has granted provisional licenses to two prominent digital asset exchanges, Quidax and Busha. This development comes just one week after the SEC hinted at the imminent issuance of its first set of crypto licenses, signaling a cautious but pivotal shift in the regulatory landscape for digital assets in the country.
The SEC’s approval is part of its Accelerated Regulatory Incubation Program (ARIP), introduced in July 2024. ARIP was designed to bring crypto exchanges that were operational before the SEC released its rules on virtual asset service providers in May 2022 into a regulated framework. The provisional licenses are a precursor to full registration, ensuring that appropriate protections and transparency measures are in place.
“The referenced Approvals-in-Principle are a precursor to the grant of full registration by the SEC and are meant to ensure that appropriate protection and transparency is in place in respect of each product or service,” the SEC clarified in a statement on Thursday.
The introduction of ARIP and the granting of provisional licenses aim to create a safer and more regulated environment for Nigeria’s millions of crypto enthusiasts. According to Busha CEO Michael Adeyeri, this move is an “overdue step to sanitize the space for the benefit of the economy, in line with global expectations.” Quidax also confirmed the receipt of its provisional license, marking a milestone for the exchange and the industry at large.
This decision by the SEC follows months of uncertainty and speculation about the regulator’s stance on crypto licensing. Earlier in the year, the Central Bank of Nigeria (CBN) lifted a two-year ban on crypto-related banking transactions, prompting discussions between crypto exchanges and the SEC regarding the necessary licenses. The SEC’s recent actions indicate a significant policy shift, especially in light of the increased scrutiny that crypto exchanges have faced since February 2024.
The SEC has also expressed concerns over the impact of peer-to-peer (P2P) trading on the volatility of the Nigerian naira in the foreign exchange market. In May 2024, the SEC Director-General met with industry players, emphasizing the need for crypto exchanges to delist the naira from P2P trading platforms—a measure that could further reshape the operational landscape for digital asset exchanges in Nigeria.
As Quidax and Busha embark on their journey under the SEC’s regulatory incubator, their progress will be closely monitored, setting the stage for the future of cryptocurrency trading in Nigeria. The licenses represent a critical step toward the formalization and regulation of the crypto industry, aligning with global standards and potentially opening doors for more regulated crypto activities in the country.