The Nigerian Securities and Exchange Commission (SEC) will grant licenses to virtual assets service providers such as cryptos this month. This is in line with Nigeria’s move to regulate the escalating use of cryptocurrency. This is happening at a time when the Nigerian currency, the naira, has lost 70% of its value against the dollar since June last year.
Nigeria Shifts from Ban to Crypto Regulation
The Nigerian government has transitioned from earlier efforts to ban cryptocurrency to the current move to regulate it. This comes after forceful measures such as the Central Bank of Nigeria (CBN) banning banks from dealing with cryptocurrencies. But still, the adoption of cryptocurrencies continued, with Nigerians using other platforms such as Bitkoin Africa Inc. and Quidax after the government banned Binance.
The SEC’s decision to issue licenses is strategic as it seeks to tap into the potential of the crypto market while regulating it. The agency wants to establish a legal basis for exchanging digital assets to avoid fraud and regulate the market. The move comes amid a push to support the country’s tech-savvy youth, who have turned to cryptocurrencies as a way around the traditional banking system.
Nigeria Balances Crypto Innovation with Regulation
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The SEC’s licensing initiative is part of a larger plan to encourage innovation while maintaining the appropriate level of regulation. President Bola Ahmed Tinubu’s administration in Nigeria has been quite ambiguous in its approach towards Cryptocurrencies. Although Tinubu’s campaign advocated for regulating cryptocurrencies and advancing blockchain technology, his government has also taken actions that have elicited concerns from the crypto industry.
Under the Finance Act, the government introduced a capital gains tax on profits from digital assets in 2023. Some viewed this as the bank getting closer to embracing cryptocurrencies, while others expressed concern over the effect on the unstable market. Furthermore, the government has made rather paradoxical decisions: it has banned P2P trading while allowing banks to provide services for cryptocurrencies.
Nigerian Youth Boost Crypto Use Amid Challenges
Nigeria’s youth have been the most active in the usage of crypto despite the bans and restrictions put in place by the government. The size of credit operated through cryptocurrencies in Nigeria rose 9% in June 2023 to $56.7 billion compared with the previous year. This growth shows that the market is still very dynamic, and young Nigerians have the zeal to contribute to the world’s digital economy.
SEC’s move to license crypto exchanges is expected to bring an organized layout of the trading mechanism, which will likely help the government keep an eye on the industry more effectively. The agency has revealed its aim to foster the growth of the fintech industry because of its ability to contribute to the development of the economy and the creation of new jobs. But the government is still wary of cryptocurrencies’ dangers, especially with the Nigerian currency, the Naira.
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Also Read: Users in Nigeria Demand Binance to “Stop Scamming”
