SEC Enhances Investor Protection with New Capital Requirements
The Securities and Exchange Commission (SEC) of Nigeria has released an updated policy concerning its crypto capital rule, increasing the requirement to two billion naira. The agency stated that this move aims to improve investor protection and align Nigeria with global cryptocurrency standards.
The compliance deadline for this increased capital requirement is set for June 30, 2027. This timeline may compel smaller firms to merge or exit the market permanently.
Impact of the New Crypto Capital Rule on the Nigerian Market
According to the SEC, these changes reflect the significant increase in funds managed by digital platforms within the country. The agency also anticipates that the new rules will reduce systemic risks, particularly in a market where the failure of an operator could have substantial consequences for users.
In its statement, the SEC emphasized that firms failing to meet the June 30, 2027 deadline risk sanctions, including suspension or withdrawal of their registration. The higher capital requirement ensures that only firms with substantial financial capacity are permitted to operate.
Beyond financial capacity, the SEC also highlighted the expectation for these firms to implement robust governance structures and effective risk management systems. This is crucial in an industry that is consistently exposed to risks such as fraud, volatility, and cross-border financial flows.
Industry Reactions to the SEC's New Policy
The SEC's stance has been met with approval from some industry veterans. Demola Aladekomo, chairman and founder of CHAMS Plc, described the move as timely and necessary for the crypto population in Nigeria.
“The business of crypto is global. It is going on whether we like it or not. We must commend the SEC for being very proactive in ensuring that we get into it with proper regulation,” Aladekomo stated. Regarding the N2 billion requirement, he found it appropriate given the inherent risks in crypto operations, adding that capital is merely the initial layer of scrutiny.
Aladekomo further explained that the licensing process involves comprehensive checks on systems and security. It also includes other requirements such as know-your-customer (KYC) protocols for directors, technology deployment, provisional approvals, and post-licensing audits.
“If smaller players are serious about operating, they should look at mergers or acquisitions,” he advised. For existing operators, the new rules present a more challenging but unavoidable regulatory landscape.
Moyo Sodipo, chief operating officer of Busha, a crypto exchange provisionally licensed by the SEC, commented that the updated capital requirements signify a stringent assessment of risks and market integrity. “The increased capital requirements signal a stricter regulatory assessment of risk and market integrity in the digital asset space,” Sodipo remarked.
He added that Busha remains committed to ongoing dialogue with the regulator, advocating for “fair and proportionate rules that support a healthy, sustainable ecosystem.”
Concerns Regarding Innovation and Competitiveness
Conversely, some critics argue that the new rules may stifle innovation. Obinna Iwuno, chief executive of CBC Blockchain Services, expressed concern that the N2 billion requirement is excessive and not competitive on a global scale.
“Increasing capital requirements to N2 billion makes Nigeria the most expensive jurisdiction in the world for a crypto license. And yet Nigeria is not even among the top 10 markets in the world in terms of liquidity and volume,” he asserted.
Iwuno concluded that this policy could negatively impact the Nigerian crypto market and lead to the elimination of local players.