Introduction
The adoption of Cryptocurrency has gained significant traction in Nigeria over the years, serving as a store of value to hedge against inflation and as an investment tool for increasing wealth. It has also become a medium for international transfers, where individuals send cryptocurrency to family members in Nigeria who in turn convert it to local currency.
Despite its popularity, cryptocurrency usage has not been without challenges. In this newsletter, we examine the regulation of cryptocurrency in Nigeria and outline the steps businesses must take to operate within the country in compliance with existing regulations.
Crypto Regulation in Nigeria
In 2021, the Central Bank of Nigeria (CBN) issued a directive instructing banks to cease facilitating payments for cryptocurrency exchanges and to close the accounts of individuals and entities transacting in or operating crypto exchanges. According to the CBN, this directive aimed to mitigate the risks of money laundering and terrorism financing associated with cryptocurrency transactions.
In December 2023, the CBN partially reversed its stance by issuing the Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (the "Guidelines").1
These Guidelines permitted cryptocurrency trading companies—such as crypto exchanges, crypto wallets, and digital currency creators—to open bank accounts, provided they met specific conditions, including obtaining a license from the Securities and Exchange Commission (SEC).'
At present, the SEC is the primary regulatory body overseeing cryptocurrency and othe digital assets in Nigeria. The Guidelines followed the SEC's release of Rules on the issuance and custody of Digital Assets in May 2022. These Rules established the framework for the registration and operation of Virtual Asset Service Providers (VASPs) which include crypto companies.2
In June 2024, the SEC introduced the framework on the Accelerated Regulatory Incubation Program (ARIP), which expedited the registration process for VASPs.3 Following the release of the framework, the SEC announced in August 2024 that it had granted licenses to two crypto exchanges.
These developments demonstrate that cryptocurrency companies can operate in Nigeria, provided they comply with the applicable regulatory requirements.
Steps to Consider when Setting Up a Crypto Company
1. CAC Registration
Crypto companies must be registered with the Corporate Affairs Commission (CAC) as a preliminary requirement to operate in Nigeria. Companies must be incorporated with a minimum paid-up share capital of NGN 500 million.
2. SEC Registration
To operate a crypto company in Nigeria, such a company must be registered by the SEC. As of the time of this publication, registration is conducted through the ARIP program. Interested parties must submit an expression of interest to the SEC, followed by a detailed application comprising documents such as an operational plan, business model, company documents, and other requirements specified in the SEC Rules.
Upon approval, the SEC will issue an Approval in Principle, allowing the entity to operate as a regulated crypto entity. It is important to note certain requirements, including the need for crypto companies to be incorporated and have a physical office in Nigeria. Also, the Chief Executive Officer or Managing Director must be resident in Nigeria.
3. Capital Importation and Bank Accounts
Where funding for the crypto company is sourced from outside Nigeria, it must be brought in through authorized dealers (i.e., commercial banks). A Certificate of Capital Importation (CCI) is important, as it enables investors to repatriate capital, dividends, and profits earned from the company at the official foreign exchange market rates in a freely convertible currency, subject to applicable taxes.
Crypto companies can also open accounts in commercial banks for settlement purposes. It should be noted that such accounts will not bear interest, and companies are not permitted to withdraw funds in cash. Withdrawals are limited to transfers to other bank accounts or the use of a manager's cheque.
4. Immigration Considerations
If a crypto company employs foreign staff, it must obtain an Expatriate Quota from the Ministry of Interior. This quota permits the employment of foreigners within the company. Also, the company must secure a Combined Expatriate Residence Permit and Aliens Card (CERPAC) from the Immigration Service. This allows expatriate staff to live and work in Nigeria. A CERPAC is mandatory if the MD/CEO is a foreigner, as the SEC requires this individual to reside in Nigeria.
5. Intellectual Property (IP) Registration
It is crucial for crypto companies to protect their intellectual property (IP) by registering it in Nigeria. This may include registering their brand name with Nigeria's trademarks registry or patenting blockchain technology that powers their crypto assets or inventions that complement the use of crypto. It is important that IP is protected as it not only forms part of a company's assets but also enhances its valuation and goodwill.
6. Registration with the National Office for Technology Acquisition and Promotion (NOTAP)
NOTAP is the government agency responsible for regulating technology transfer agreements between Nigerian companies and foreign entities. If a crypto company engages with a foreign entity (including a foreign parent company, if applicable) to transfer technology—such as licenses to patents, trademarks, inventions, or technical, management, or consulting services—the agreement must be registered with NOTAP. NOTAP ensures that technology transfer agreements are fair and contribute to local content development. Crypto companies must register these agreements within 30 days of their effective date. Registration enables the company to make payments to foreign entities through the official foreign exchange market under a technology contract.
Conclusion
Setting up a cryptocurrency business in Nigeria requires navigating a complex regulatory framework. By complying with SEC rules and meeting other regulatory requirements, crypto companies can establish a solid foundation for operating in Nigeria. Adhering to guidelines relevant to their operations not only ensures legal compliance but also builds trust with stakeholders and will help foster long-term growth in Nigeria's evolving crypto market.
Footnotes
1. Please see our article on the CBN's Guidelines for the operation of bank accounts for VASPs here – https://pavestoneslegal.com/regulatory-update-central-bank-of-nigeria-guidelines-on-operation-of-bank-accounts-for-virtual-assets-service-providers/
2. Please see our article on the regulation of VASPs in Nigeria – https://pavestoneslegal.com/regulatory-update-regulation-of-virtual-assets-service-providers-in-nigeria/
3. Please see our article on the ARIP Program here – https://pavestoneslegal.com/insights-into-the-sec-accelerated-regulatory-incubation-program-framework/
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
