Last updated on May 17th, 2022 at 10:11 am
On Thursday, May 11, 2022, Nigeria’s Securities and Exchange Commission (SEC) released a new rule book on digital assets. The book detailed some of the registration requirements for cryptocurrency exchanges in Nigeria. This means that crypto-based companies will now have to be certified by the regulatory body.
It is the first official rule book from the SEC after the Central Bank of Nigeria (CBN) on February 5, 2021, restricted financial institutions in Nigeria from funding wallets on crypto exchanges, prompting the crypto community in the country to switch to peer-to-peer exchange.
For us, the decision of SEC will definitely increase the adoption of bitcoin, Ethereum, litecoin, bitcoin cash, and other coins in Nigeria.
The new digital assets policy in the most populous African country is a new dawn. And in this article, we outline the step-by-step guide to registering cryptocurrency exchange in Nigeria
More details about the SEC’s new policy on digital assets can be found in one of our articles. It also containes the download link of the file.
Are you worried about the potential legal hurdle?
We know it could be daunting setting up a cryptocurrency-based firm in Nigeria amidst the new law since it’s the first time the Nigerian authority would be coming in after several years of warning that Nigerians should not trade in digital assets describing it as extremely risky and filled with fraud.
At this time, the crypto-based registration process is still new to lots of business owners and those who are interested in setting up crypto trading platforms in Nigeria.
But don’t you worry, we’ve got you covered in this step-by-step guide on how to get register your business name at the CAC and satisfy the requirements of SEC (a most for digital asset business set).
You’d have to pass through four major hurdles to register a cryptocurrency exchange or firm or digital asset company in Nigeria.
- Register your business with the CAC
- Fill capital market fintech assessment form
- Registration proper with SEC
- Pay the required fees at SEC to get a certificate of operation
- Complete the necessary forms
- Show evidence of Paid-Up Capital and Fidelity Insurance Bond
- Show Copies of credentials of sponsored individuals
- Submit profile of company
- Detailed information about the trading system
- Submit business plan
- Submit corporate documents
Register your business with CAC
To operate a legal business in Nigeria, it’s mandated to register with the Corporate Affairs Commission (CAC)
The CAC was established by the Companies and Allied Matters Act, which was promulgated in the year 1990 to regulate the formation and management of companies in Nigeria.
It is saddled with the responsibility of registering companies in Nigeria, which is a must for company formation in Nigeria, we’ve covered this process in one of our guides.
Fill Capital Market FinTech Assessment Form
Now that you have the required legal documents from the Corporate Affairs Commission, it’s time to fill out the SEC’s capital market FinTech form because you will need some of the information in the assessment form.
Required Information in the Capital Market FinTech Assessment Form
- Email address
- Phone Number
- Full Name(s)
- Name of Business/innovator
- Address of Business/innovator
- Website URL(s)
From the list of sectors, you can choose any of the following:
- Digital Assets/Crypto Token Exchanges
- Digital Investment Advisory/Wealth Management
- Fund/Portfolio Management
- Digital Marketplace
- P2P lending
- Attach CAC Certificate
- Memorandum and Articles of Association (MEMART)
- And other info
Registration proper with SEC
According to SEC, “The registration process for virtual assets will therefore involve a two-prong approach – an initial assessment filing to satisfy the burden of proof and a filing for registration proper, either made directly by the issuer or sponsor or where the burden of proof is not satisfied.”
SEC Required Fees for Crypto Exchange Registration in Nigeria
Part of E of the SEC’ “Rules on Issuance Offering and Custody of Digital Assets in Nigeria” spells out the required fees any one organisation or individual must pay to operate a cryptocurrency exchange in Nigeria.
Titled, “Rules on Digital Assets Exchange (DAX)”, the requirements are:
- Filing/Application Fee – N100,000
- Processing Fee: NNG300,000
- Registration fee: NNG30,000,000
- Sponsored Individuals Fee: NNG100,000
Note: You must also meet the general requirements for Virtual Assets Service Providers (VASPs) as contained on pages 38 to 45 of the SEC’s new rule book on digital assets.
Complete the necessary Forms
Duly Executed Form SEC 5 – For the Crypto-based Company
Form SEC 2 and 2D: Sponsored Individuals/Compliance Officer who shall be principal officers of the Exchange (i.e Managing Director and Principal Officers). (To be completed in duplicates)
Every applicant Manager is to have at least four sponsored individuals, one of whom should be a Compliance Officer who shall be responsible for monitoring compliance with the ISA 2007, Rules and Regulations, notifications, guidelines, instructions etc. Form SEC 2 and 2D: Directors of the Company (To be completed in duplicates)
Show Evidence of Paid-Up Capital and Fidelity Insurance Bond
Minimum paid-up capital doesn’t mean ‘physical capital’ rather it means the firm’s bank balances, fixed asset or investment in quoted securities. They include:
- Evidence of Required Minimum Paid-up Capital: NGN500,000,000
- Current Fidelity Bond covering at least 25% of the minimum paid-up capital as stipulated
- The Commission may at any time impose additional financial requirements or other terms and conditions on the DAX
- Operator that commensurates with the nature, operations and risks posed by the DAX Operator;
- All funds shall be made through Real-Time Gross Settlement (RTGS).
Show Copies of credentials of sponsored individuals
1) Minimum of four sponsored Individuals, one of whom shall be a compliance officer;
2) Managing Director of the Company to be among the sponsored individuals;
3) Full postal addresses of immediate previous employers, bankers (with Current Account number) and nominated referees of sponsored individuals;
4) Detailed curriculum vitae of sponsored individuals and Directors which should include details of activities arranged from Secondary School to date with dates; (all gap in employment and educational history should be explained);
5) Copies of credentials of sponsored individuals including secondary school and NYSC discharge certificates; originals will be required for sighting by the SEC;
6) Evidence from the Sponsored Individuals of having a minimum of four years post-graduation experience to perform the Function as stipulated by the Commission`s Rules and Regulations:
7) Police clearance report for each Sponsored Individual. Each sponsored individual is to report at the SEC head office in Abuja or the Lagos zonal office with two recent passport photographs to commence the process;
8) Copy of means Identification of the Directors and the Sponsored Individuals of the Company (International Passport, tax or utility payment documents);
Submit profile of the company
1) The name(s) and address (es) of the company’s subsidiaries/associated companies, type of business and percentage holding
2) Copy of the Form for the General Undertaking for Members
3) Two copies of existing or proposed by-laws or rules, Code of Conduct, Code of Dealing etc., which are referred to as ‘Rules of the Exchange’;
4) Profile of the Company should include among others brief history of the company, organizational and shareholding structure, principal officers as well as details of past and current activities
5) Information as to its organization including structure and profile of members of its Council/Board as well as rules and procedure
6) Detailed information about the promoters and principal officers of the Exchange
7) Evidence of Payment of shares allotted to the shareholders
8) Copy of the proceedings of the Exchange and the detailed documents in respect of the Investor Protection Fund and Trade Guarantee Fund when finalized
9) Forward Instruction and Inspection manuals of members activities
10) Copy of information relating to the Market Facilities including Trading facilities/floors, Quotation Board, Information Board/Ticker Tape, Computerization and Telephone systems
Copy of Staff Policies and Procedures
- Two copies of the listing requirements of the Exchange
- Detailed information about the trading system to be adopted
- Undertaking by the Exchange to forward copies of Amendments of its Rules and listing requirements for approval by the Commission
- Operational manual and organizational chart of the company
Bank statement of accounts operated by the Company;
To finalise the registration process of a crypto-based firm in Nigeria, check below for the corporate documents you’d need to submit before the SEC
1. A copy each of the following, duly certified by the CAC
2. Certificate of Incorporation
3. Memorandum and Articles of Association – this should include the power to perform the specified function;
4. CAC Form(s) showing Statement of Share Capital, Return of Allotment, and Particulars of Directors
Note: the original copy of the certificate is to be presented for sighting by an authorized officer of the SEC
5. Latest audited accounts or audited statements of affairs of the company.
6. Sworn undertaking to keep proper records and render returns as may be specified by the Commission from time to time signed by a director or the company secretary (to be notarized);
7. Sworn undertaking to abide by SEC Rules and Regulations and Investments and Securities Act No.29 of 2007 by a director or the company secretary (to be notarized)
8. Sworn undertaking by members serving on the Board of Directors of the Company and who are also Directors/having interest in Companies whose securities are being traded/could be traded on the Exchange (notarized)
9. Sworn undertaking to abide by Investments and Securities Act (ISA) No 29 of 2007 and the Commission`s Rules and Regulations(notarised)
10. Sworn undertaking to comply with and to enforce compliance by its members with the provisions of the Investment & Securities Act (ISA) 2007 and the Commission`s Rules and Regulations(notarised);
The Commission may require such other documents as it considers necessary for registration.
An application for registration will only be considered as having been filed when all document (s)/information have been completed.
Every applicant Company/Firm will be inspected in the course of processing an application for registration,
A fair knowledge of the Rules and Regulations of the Commission and Investments & Securities Act No 29 of 2007 and the Capital Market is an essential prerequisite for registration.
In case you have more inquiries, reach out to SEC through one of its branches across Nigeria to register your cryptocurrency trading platforms and ICOs.
SEC Offices in Nigeria
Head Office – Abuja
SEC TOWERS, Plot 272, Samuel Adesujo Ademulegun Street, Central Business District
3, Idejo Street, Opposite ICON House,
Off Adeola Odeku Street, Victoria Island
African Alliance House (4th Floor), F1, Sani Abacha Way/Airport Road, Opposite KLM Airlines
31 Woji road, GRA phase 2
With the new directive of the SEC, the government is heading towards generating more revenue from cryptocurrency wallet operators and others who provide crypto-based services in Nigeria through registration fees at the same legitimizing the operation of cryptocurrency companies in Nigeria, we have lots of them springing up every day.
What’s the cost of registering crypto exchange in Nigeria?
It will cost at least NGN30.5 million to register a cryptocurrency exchange in Nigeria, according to SEC’s new rule book published on May 11, 2022.
The fees are: Filing/Application: NGN100,000; Processing Fee: NGN300,000; Sponsored Individuals Fee: NGN100,000, and Registration fee: NGN30,000,000. Registration at CAC isn’t included in this cost.
Will cryptocurrency traders in Nigeria pay tax?
The government is seriously thinking in this direction and the FIRS may come up with digital coin taxation in future.
Who is eligible to set up a crypto exchange in Nigeria?
Someone who has a perfect understanding of how blockchain and crypto work and meets the requirements of SEC.