SEC Proposes Tougher Rules for Crypto Firms, Sets ₦2bn Capital Requirement

The Securities and Exchange Commission (SEC) has proposed a N30 million registration fee for digital asset providers operating in Nigeria.

The fee is contained in SEC’s proposed rules on “Digital and virtual asset operations, custody and markets,” released on August 20.

Under the framework, digital asset exchanges (DAXs), digital asset custodians (DACs), digital asset platform operators (DAPOs), digital asset offering platforms (DAOPs), and real-world asset tokenisation platforms (RATOPs) would each pay a N30 million registration fee.

The commission also proposed higher capital requirements for operators.

Under the framework, DAXs and DACs would each require minimum capital of N2 billion, while DAPOs, DAOPs and RATOPs would require N500 million each.

Additionally, virtual asset service providers (VASPs) would have a minimum capital requirement of N200 million and applicants would be required to pay a N100,000 processing fee and a N300,000 application fee.

SEC also proposed that regulated entities maintain a fidelity insurance bond covering at least 25 percent of their minimum paid-up capital.

The commission recommended that entities seeking to operate under the accelerated regulatory incubation programme (ARIP) pay a N200,000 initial assessment fee and a N2 million ARIP application fee.

The framework also introduced ongoing supervisory charges linked to the turnover of regulated entities.

According to SEC, a DAX operating under ARIP would be required to pay a supervisory fee of 0.015 percent of adjusted turnover, while other entities under ARIP would pay 0.0075 percent.

Following full registration, the commission outlined that the supervisory fee would rise to 0.025 percent of adjusted turnover for DAXs and 0.015 percent for other regulated entities.

According to the SEC, a digital asset exchange under full registration “shall pay a supervisory fee of 0.025% of adjusted turnover, payable quarterly or at such frequency as may be prescribed by the commission”.

The commission added that any other regulated entity under full registration will pay a supervisory fee of 0.015 percent of adjusted turnover, payable quarterly or at such frequency as it prescribes.

SEC CONSIDERS N1M INVESTMENT CAP PER ISSUER, N10M AGGREGATE LIMIT

The commission also proposed limits on retail investors’ participation in digital asset offerings, including a N1 million investment cap per issuer and an aggregate limit of N10 million within a 12-month period.

The rules stipulate that “a retail investor shall not invest more than ₦1,000,000 per issuer and ₦10,000,000 in aggregate across digital asset offerings within any twelve-month period, or such other amount as the Commission may prescribe from time to time”.

SEC further proposed that where a retail investor seeks to invest more than N1 million or five percent of the investor’s net worth — whichever is higher — in a digital asset offering, the digital asset offering platform must meet certain requirements before accepting the investment.

The commission further said the platform must provide the investor with a prominent risk warning, obtain the investor’s express consent to proceed with the investment, and confirm that the investor understands the nature of the investment and the material risks involved.

SEC recommended that the platform must also assess whether the investment is appropriate for the investor, taking into account the investor’s knowledge, experience, financial circumstances and ability to bear loss.

The commission noted that the platform is required to keep records of the warning, consent, confirmation, and assessment.

The rules also require digital asset offering platforms to establish systems and controls for assessing, monitoring, and enforcing applicable investment limits.

“A Digital Asset Offering Platform shall establish systems and controls to assess, monitor and enforce applicable investment limits, including investor categorisation, risk acknowledgement, net worth declaration or assessment, and aggregation of investments made through its platform,” SEC said.

The legislation stipulates that institutional investors, qualified investors, high net worth investors or other categories recognised by the commission, may be exempted from the prescribed limits.

The commission said it may also prescribe different investment limits, risk-warning thresholds, investor categories, suitability requirements or aggregation requirements for different classes of digital asset offerings, investors or platforms.

SEC PROPOSES GENERAL RULES FOR MARKET OPERATORS

The commission said no person shall conduct any digital or virtual asset business, service, function or activity in Nigeria, or target persons resident in Nigeria, unless registered, approved or authorised by SEC in accordance with the proposed rules.

SEC added that such an entity must comply with the Nigerian code of corporate governance, the commission’s corporate governance requirements, and any other applicable governance standard.

According to the framework, a foreign stablecoin issuer seeking recognition to operate in Nigeria must appoint or maintain a local representative, demonstrate authorisation in an acceptable foreign jurisdiction, and submit to Nigeria-specific reserve, liquidity and redemption-support conditions the commission may prescribe.

The framework also proposed mandatory registration under the ARIP for all companies seeking to operate in the country’s crypto market.