Nigeria’s Securities and Exchange Commission (SEC) has granted “in-principle approval” to two digital asset exchanges under its Accelerated Regulatory Incubation Program (ARIP). The move underscores the SEC’s dual commitment to fostering capital market innovation and ensuring investor protection. In addition, five companies have been admitted to the SEC’s Regulatory Incubation (RI) program to test their technology and business models in a controlled environment.
The ARIP initiative, launched in response to the growth of the digital asset sector ahead of the May 2022 rulemaking on virtual asset service providers, aims to seamlessly integrate existing digital exchanges into the regulatory framework. At the same time, the RI program provides a sandbox for emerging technologies to be tested under the SEC’s supervision, reflecting a proactive approach to regulatory oversight.
A closer look at the cohort
The approved cohort includes Busha Digital Limited and Quidax Technologies Limitedwhich are both digital exchange platforms facilitating cryptocurrency transactions in Nigeria and beyond. These platforms support various operations from trading to payments, leveraging proprietary blockchain technology for enhanced security and accessibility.
The cohort also includes innovative platforms like Trovotech Ltd, which aims to tokenize real-world assets like real estate and agriculture, and Wrapped CBDC Ltd, which plans to introduce a stablecoin pegged to the Nigerian naira to facilitate crypto transactions.
Table 1: Key business models and services of each company approved by the Nigerian SEC under the ARIP and RI programs
| Company Name | Platform Type | Main offer |
| Busha Digital Limited | Digital Asset Exchange | Makes it easy to buy, sell, store, and exchange cryptocurrencies with fiat money. |
| Quidax Technologies Ltd | Digital Asset Exchange | Offers a cryptocurrency trading platform using a proprietary blockchain for token listing and trading. |
| Trovotech Ltd. | Digital Asset Offering Platform | Develops a platform for tokenization and trading of illiquid real-world assets like housing and infrastructure. |
| CBDC Wrapped Ltd | Digital Asset Offering Platform | Plans to introduce a Nigerian stablecoin (cNGN) pegged to local currency to facilitate crypto payments. |
| Home Exchange.NG Ltd | Digital Asset Offering Platform | Enables capital raising through property tokenization, with built-in exchange features for liquidity. |
| Capital of the dream city | Digital Asset Offering Platform | Provides a digital platform for acquiring interests in real estate through a special purpose company (SPC) framework. |
| Blockvault Ltd Custodian | Digital Asset Custodian | Provides secure storage, management and custody of digital assets, ensuring compliance with AML/CFT laws. |
Strategic Implications for Nigeria’s Financial Landscape
This regulatory move comes at a crucial time. Nigeria’s commitment to cryptocurrencies has increased amid economic challenges, such as a weakening currency and high inflation. The country’s young, tech-savvy population has been an early adopter of digital assets as a hedge against economic instability.
According to a report by Chainalysis, Nigeria saw a 9% increase in crypto transaction volume year-over-year, totaling $56.7 billion from July 2022 to June 2023.
Regulatory Balance Act
The introduction of these programs marks a turning point for Nigeria, a country where cryptocurrency adoption has been fueled by economic instability, including the weakening naira and soaring inflation. As traditional financial systems struggle to provide stability, Nigerians are increasingly turning to cryptocurrencies as a hedge against economic downturns. This trend has not gone unnoticed by the SEC, which is navigating a fine line between embracing innovation and protecting the public from potential risks.
ARIP was created, in part, to onboard companies that were already operational before the SEC issued its rules on virtual asset service providers in May 2022. By granting “approval in principle,” the SEC not only legitimizes these companies, but also subjects them to rigorous oversight that will eventually lead to full registration. This phased approach allows the SEC to closely monitor companies, ensuring that strong consumer protections and transparency measures are in place before they fully enter the market.
Consequences for the future
The SEC’s regulatory incubation initiatives are a clear indication that Nigeria is looking to become a leader in the digital asset space in Africa. By allowing companies to test their models and technology under close supervision, the SEC is laying the foundation for comprehensive policies that could shape the future of digital finance in the country.
However, the SEC has also been explicit in its warning to the public: only entities that have been approved under the ARIP or RI programs are legally allowed to engage in cryptocurrency trading in Nigeria. This move is part of a broader effort to crack down on illegal operators and protect investors from fraudulent schemes that have ravaged the cryptocurrency market globally.
As Nigeria continues to face economic challenges, cryptocurrency adoption is likely to grow, making the SEC’s role in this area even more crucial. The outcomes of the ARIP and RI programs will not only influence future regulatory policies, but could also determine Nigeria’s position in the global digital asset ecosystem.
In a country where a young, tech-savvy population has enthusiastically embraced cryptocurrencies, the SEC’s actions will be closely watched, both domestically and internationally. The success of these programs could pave the way for a more robust and inclusive financial system, providing Nigerians with new opportunities to participate in the global digital economy.
Also read: Nigeria set to legalize Bitcoin and other cryptocurrencies after its CBDC project fails
