SEC grants preliminary approval to two cryptocurrency firms

The Securities and Exchange Commission (SEC) has announced that it has granted “approval-in-principle” to two digital asset exchanges, allowing them to commence operations under the newly introduced Accelerated Regulatory Incubation Programme (ARIP).

In a statement on Thursday, SEC said the companies approved are Busha Digital Limited and Quidax Technologies Limited.

The approval comes after SEC announced plans to licence virtual asset providers, including cryptocurrencies, to support youth engagement and investor protection as digital asset adoption grows in Nigeria.

According to the SEC, ARIP is designed to include multiple cohorts of firms, comprising two digital asset exchanges, four digital asset offering platforms, and one digital asset custodian.

Busha operates a digital exchange platform facilitating the buying and selling of cryptocurrencies with traditional (fiat) currency.

“Busha operates a digital exchange that facilitates the buying and selling of crypto assets with fiat currency,” SEC said.

“It enables individuals and businesses in Nigeria and other developing economies to access basic digital asset investment services.

“Busha’s customers use the mobile and web applications to buy, sell, store, send, receive, trade, invest, and make payments in cryptocurrencies.”

Quidax operates a cryptocurrency trading platform in Nigeria. The platform leverages blockchain technology to list and trade already issued crypto tokens (assets).

“The services are provided via a proprietary blockchain owned and controlled by Quidax. The exchange platform is both web and mobile-enabled for ease of access and use.”

SEC said Quidax also utilises digital wallets to enable its users to store, receive, and transact in “a variety of cryptocurrencies.”

It added that the five firms have been admitted to test their models and technology under the SEC’s regulatory incubation programme.

“They are Trovotech Ltd, Wrapped CBDC Ltd, HousingExhange.NG Ltd, Dream City Capital, and Blockvault Custodian Ltd,” the agency said. “The SEC recently introduced the ARIP to strategically onboard firms which had commenced operations prior to the release of the rules on Virtual Asset Service Providers in May 2022.

“Conversely, the RI Program was created to assess the business models of digital assets firms and test innovative products, services, and technology in a real-time market environment under close supervision by the SEC.”

According to the commission, the current cohort of the ARIP and RI programmes is distinguished by the increased use of Distributed Ledger Technology (DLT) in the creation and trading of cryptocurrency assets.

“Tests would be conducted on a short-term and small-scale basis, and the SEC would continue to work with the participating firms to agree on testing parameters as well as robust consumer safeguards,” the agency added.

“The referenced approvals-in-principle are a precursor to the grant of full registration by the SEC and are meant to ensure that appropriate protection and transparency are in place in respect of each product or service.”

SEC also stated that the two firms are not the only ones that have applied to the ARIP and RI programmes.

Other applications received, according to the commission, are being reviewed and will be granted approval-in-principle on a case-by-case basis if all requirements are met.

“The SEC uses this medium to reiterate that only approved digital exchanges and platforms are legally authorised to carry out the business of crypto trading in any form in Nigeria,” the regulator said.

“In this regard, the ARIP and RI remain the only avenues for well-intentioned entities to legitimately introduce their digital products and services to the Nigerian Capital Market.”

SEC, however, urged the public to refrain from dealing with illegal operators who have not applied to and received approval under the ARIP or the RI programme.

It also reminded intending investors to always confirm from the various information portals whether entities “purporting to provide investment services are legally empowered to do so.”