Nigeria licenses its first digital asset exchanges

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Nigeria’s securities regulator has issued the first operating licenses to two digital asset exchanges: Quidax and Busha Digital.

The Securities and Exchange Commission (SEC) has been exploring a regulatory regime for VASPs for years, with the takeover by pro-Bitcoin Director General Emomotimi Agama earlier this year speeding up the process.

The regulator says that the move will ensure the country’s youth can leverage the power of digital assets in financial inclusion and get them more involved in the financial market.

“It is crucial that we respond to the global trends in digital finance. SEC is committed to ensuring Nigeria remains competitive and innovative in the global financial markets. We are building the necessary talent and infrastructure to manage the challenges and opportunities that these new asset classes present,” stated Agama.

Agama acknowledged that many Nigerian youth are already involved in digital asset trading. Any attempts by the government to stifle access to digital assets would only have pushed this group to unregulated and risky platforms where they could lose their money with no legal recourse.

Nigeria is Africa’s largest Bitcoin market, trading nearly $5 billion monthly in 2023. It’s also the world’s largest peer-to-peer digital asset market and the fourth-largest recipient of DeFi value, according to Chainalysis.

However, the industry has been on the receiving end of a government crackdown that started years ago but intensified this year. Influential government officials, including the central bank governor, have accused exchanges of manipulating the naira, which has taken a nosedive over the past two years.

Several offshore exchanges have been forced to shut down, with Binance among the first victims for allegedly orchestrating a “sophisticated heist against the Nigerian economy.”

A new era for Nigeria’s digital asset sector

Despite the crackdown, Agama reiterated the government’s commitment to pushing digital assets in Nigeria. He described the sector as vital to President Bola Tinubu’s digitalization vision, with which the veteran politician wooed young voters in last year’s polls.

Quidax and Busha Digital had to participate in a controlled regulatory environment and had to meet “the SEC’s stringent fit-and-proper-persons test and other regulatory guidelines [and] are now part of the regulatory incubation process.”

“This process allows the SEC to closely monitor their activities, assess the risks they pose, and ensure they operate within a framework that protects both the economy and individual investors,” the SEC Director stated.

Commenting on the approval, Quidax CEO Buchi Okoro said it will give Nigerian traders more confidence when trading digital assets after years of uncertainty.

“This is a big win for Nigeria’s embrace of crypto, and we are glad to be a part of this historical moment.”

In a follow-up interview, Quidax Director of Partnerships Ezichim Onweagba revealed that the exchange has been working with the SEC on licensing for six years.

“We knew the importance of being regulated, especially for crypto and emerging technology. We know that investor confidence is a very big part of succeeding in financial markets.”

Busha Digital’s CEO, Michael Adeyeri, revealed that his exchange has also been working with the SEC since it launched five years ago.

I’m pleased to announce that Busha has been granted one of the first provisional licenses from the Nigerian Securities and Exchange Commission to operate as a regulated Virtual Asset Service Provider. pic.twitter.com/09ezpYqLLd

— Michael Adeyeri (@michael_adeyeri) August 29, 2024

“Millions of Nigerian crypto enthusiasts and users deserve safe and moderated local venues for managing and trading crypto-assets, and this is an overdue step to sanitise the space for the benefit of the economy, in line with global expectations,” he commented.

Beyond investor confidence and standardization, the licensing will also allow the exchanges to easily access banking and credit facilities, says Seun Dania, the CEO of Lagos-based consultancy Alpha Geek Tech. For years, VASPs have been blackballed by Nigeria’s banking system, which viewed them as highly risky ventures.

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