CRYPTO REGULATION IN NIGERIA: AN ADOPTION OR A STRANGULATION; A COMPARATIVE ANALYSIS WITH OTHER JURISDICTIONS Cryptocurrency adoption has become a global phenomenon, with countries adopting varying approaches to regulate, promote, or restrict its use. Nigeria, as Africa's largest economy, has emerged as a key player in the cryptocurrency space. However, the regulatory landscape in Nigeria raises important questions: Is the regulatory framework fostering adoption or creating bottlenecks that strangle innovation? This article explores the dynamics of cryptocurrency regulation in Nigeria, compares it with other jurisdictions, and examines the legal framework, relevant laws, and case scenarios shaping the sector. HISTORY OF CRYPTOCURRENCY RGULATORY DEVELOPMENT IN NIGERIA&nbsp; In 2016 the Central Bank and Nigeria Deposit Insurance Commission (NDIC)&nbsp;set up a commission&nbsp;to investigate Bitcoin following the MMM Ponzi scheme. In January, 2017, the Nigerian&nbsp;SEC issued a warning&nbsp;to Nigerians that no companies or entities involved with cryptocurrencies would be recognized or authorized. Additionally, it stated that there were no protections or insurances against financial losses involving cryptocurrencies. In February, 2021, the central bank banned banks and financial institutions from supporting crypto asset transactions. Money-laundering and terrorism financing risks were cited. Additionally, some Nigerians involved in cryptocurrencies reported having their&nbsp;bank accounts frozen. In May, 2022, the Nigerian SEC published&nbsp;new regulations&nbsp;about issuing, offering platforms to and custody of digital assets. It detailed how the country’s financial institutions could interact with digital assets. As part of this is a paid up share capital requirement of 500 million Naira ($362,500, as of February 2024) for crypto exchanges seeking a virtual asset service provider (VASP) licence and also a license fee of 30 million Naira. In May, 2023, the Nigerian SEC published&nbsp;regulations for digital assets, suggesting the authorities were seeking middle ground between a ban and a lack of regulation. In December, the Nigerian SEC&nbsp;lifted its ban&nbsp;on banks operating accounts for crypto service providers, and the central bank stated that global trends suggested a need to regulate the activities of VASPs, which includes cryptocurrencies and assets. In January, 2024, the central bank&nbsp;released initial guidelines&nbsp;for banks opening cryptocurrency accounts, but the ban remains on banks’ ability to trade or hold virtual assets within their own portfolios. The guidelines include stringent anti-money laundering (AML), know your customer (KYC) and other measures. Plus, banks are required to set what is described as “prudent” transaction limits and not allow cash withdrawals from crypto accounts. In June, 2024, SEC issued a circular notify the public that the Rules on Digital Asset Issuance, Offering, Exchange and Custody is undergoing amendment process.From the foregoing, it is clear that the initial attitude of Nigeria to cryptocurrency and virtual asset was outright ban and aggressive crackdown. This attitude was however not far from the attitude of other countries. For instance, In 2018, the Reserve Bank of India (RBI) imposed a ban preventing banks from dealing with cryptocurrency transactions. This ban was overturned by the Supreme Court in March 2020. The initial attitude was understandable because of the nature of crypto currency and virtual asset innovation which is highly prone to financial crimes.Cryptocurrency has however enjoyed significant global acceptance across jurisdictions in the recent time. Remarkable is the El Salvador adoption of Bitcoin as a legal tender. Admittedly, Nigeria has plausibly moved away from the position of outright ban of cryptocurrency to attempting a regulation. The big question is whether the regulatory framework as is obtainable today in Nigeria is fostering adoption or creating bottlenecks that strangle the innovation?In attempting to answer this question, we shall pay attention to the financial requirement for DAX licence according to the available laws. This shall be considered viz-a-viz the categories of individuals that make up the major players in the industry and the economic realities of the country. We shall also consider what is obtainable in other jurisdictions.Part E Rules 6.1 of SEC Rules on Digital Asset Issuance, Offering, Exchange and Custody, 2022 provides for the following payments for licencing of DAX Filing/Application Fee – N100,000 (One Hundred Thousand Naira only)&nbsp; Processing Fee – N300,000 (Three Hundred Thousand Naira only) c. Registration fee – N30,000,000 (Thirty Million Naira only) Sponsored Individuals Fee- N100,000 (One Hundred Thousand Naira only)&nbsp; Rule 6.3 provides for the Minimum Paid-Up Capital and Fidelity Bond as follows Evidence of Required Minimum Paid up Capital – N500,000,000 (Five hundred Million Naira) (i.e. Bank balances, Fixed asset or investment in quoted securities), subject to verification of the sources of the funds;&nbsp; Current Fidelity Bond covering at least 25% of the minimum paid-up capital as stipulated by the Commission’s Rules and Regulations;&nbsp; Important to mention is that In Nigeria, cryptocurrency adoption is notably prominent among younger demographics. A significant portion of crypto investors are below the age of 30, accounting for 52% of the investor base.&nbsp; Additionally, a study by KuCoin found that 35% of Nigerians aged between 18 and 60 are investing or trading in cryptocurrencies.&nbsp; This trend is influenced by Nigeria's youthful population, with a median age of approximately 17.2 years, fostering a tech-savvy environment conducive to crypto adoption. Speaking to the above data, the next fascinating question is the extent this category of population that dominates the crypto industry would be able to comply with license financial requirements. Although , determining the exact average income for Nigerian youths &nbsp;is challenging due to limited specific data. However, available information provides some insights. As of 2024, the average monthly salary in Nigeria is approximately ₦340,000 (Nigerian Naira), equivalent to about $202.86 USD. The median monthly salary stands at ₦302,000 (around $178.12 USD), indicating that half of the population earns below this amount, while the other half earns above.&nbsp; A survey focusing on Lagos, Nigeria's largest city, revealed that 78% of workers earn an average monthly salary of ₦100,000 (approximately $58.98 USD), with only 7% earning above ₦200,000 (about $117.96 USD) per month.&nbsp; Given that a significant portion of Nigeria's population is under 35 years old, these figures suggest that many individuals within the 20 to 45 age bracket may earn around or below the national average and median salaries.&nbsp; It is submitted that the license financial burden is humongous when viewed in the light of the above analysis and it is a heavy constraint will stifle crypto innovation in Nigeria. In June, 2024 SEC issued a circular announcing that the Rules on Digital Asset Issuance, Offering and Custody, 2022 is undergoing amendment . It is most concerning that the proposed amendment has skyrocketed the license financial requirements for Digital Asset Exchange. Below is the amendment: i. Filing/Application Fee - N300,000 (Three Hundred Thousand Naira ii. Processing Fee - N1,000,000 (One Million Naira) iii.Registration fee - N150, 000,000,000 (One Hundred and Fifty Million Naira) iv.Sponsored Individuals Fee – N300,000 (Three Hundred Thousand Naira) V. Evidence of Required Minimum Paid up Capital – N1,000,000,000.00 (One Billion Naira) (i.e. Bank balances, Fixed asset or investment in quoted securities), subject to verification of the sources of the funds; Vi. Current Fidelity Bond covering at least 25% of the minimum paid-up capital as stipulated by the Commission’s Rules and Regulations. COMPARISON WITH OTHER JURISDICTIONS In Singapore, payment institutions dealing in cryptocurrencies are required to have a minimum base capital of SGD 100,000 (approximately $73,740) In Switzerland, the total cost of registering a company and obtaining a cryptocurrency license can start from CHF 20,000 (approximately $21,500), varying based on the type of license and company specifics. In United States, registering with FinCEN and complying with state-level regulations can cost upwards of $100,000 annually. Note that the U.S. is classified as one of the more expensive jurisdictions. European Union under the new MiCA (Markets in Crypto-Assets) regulations, licensing fees vary but generally fall between €50,000 and €150,000, depending on the member state. In Asia-Pacific, jurisdictions like Singapore and Hong Kong provide clear frameworks, and licensing costs about $50,000. It is agreed that the licensing costs above mentioned may not be absolute but it gives insight on what is obtainable in other jurisdictions. Notably, 19 crypto service providers were already licensed and compliant in Singapore as at 2019, credit to lower cost of licensing and compliance. This contrasts sharply with the situation in Nigeria where only 5 crypto companies have been able to obtain license in 2025. CONCLUSION&nbsp; It is submitted that the cryptocurrency regulatory landscape in Nigeria as it is obtainable today is more of a strangulation than adoption of the innovation especially paying attention to the financial requirements for licensing and when placed side by side with what is obtainable in other jurisdictions. The implication is felt in most Nigerians fighting to stay in the industry without compliance or moving on to comply in other countries with less stringent financial requirements, leading to a huge loss to the country's economy and loss of innovators. RECOMMENDATION&nbsp; It is recommended that the country's regulations should focus on checkmating and cubbing crimes associated with crypto operations at this stage rather than using license fee as a gigantic means of revenue generation. Insisting on strong AML/CFT, KYC and other related policies and playing oversight function like demanding for regular report from operators would be a better approach.Written by: THEOPHILUS O. EBENYI ESQ. Managing partner, VirtuLex LP

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