In a move to curb the growing threat of cryptocurrency-related fraud, Nigeria’s Securities and Exchange Commission (SEC) has proposed tougher penalties under the Investment and Securities Act.
Under the draft legislation, offenders could face fines of up to $12,000 (about 20 million Naira) or imprisonment for up to 10 years.
The proposed penalties come as part of Nigeria’s efforts to protect investors and maintain the integrity of its growing crypto market.
“We are taking strong steps to ensure that those who engage in crypto fraud are held accountable for their actions,” a statement from the SEC read.
The new measures are aimed at addressing the widespread scams that have plagued the country’s booming cryptocurrency sector.
Nigeria is one of the largest cryptocurrency markets in the world, but it has also earned a reputation for being a hub for scams. These fraudulent schemes have not only led to significant financial losses for individuals but have also harmed the country’s reputation in the global financial community.
One of the most notorious scams involved the Ponzi scheme MMM Nigeria, which collapsed in 2016. The scheme affected millions of Nigerians, leaving many financially devastated.
As the crypto industry in Nigeria continues to grow, scammers have increasingly used the allure of digital currencies to deceive investors.
Ponzi schemes, fake investment platforms, and fraudulent crypto trading operations are just some of the scams that have been reported in recent years.
Despite the challenges posed by these fraudulent activities, Nigeria has remained one of the fastest-growing crypto economies globally.
In fact, a 2023 report by Chainalysis ranked Nigeria as the second-largest country in terms of cryptocurrency adoption. This places Nigeria behind only Vietnam in terms of crypto adoption rate.
Nigeria has also been the most “crypto-obsessed” country, according to Google search volumes for terms like “cryptocurrency” or “buy crypto.”
However, the Nigerian government has faced difficulties in regulating the rapidly expanding cryptocurrency market. In recent years, the SEC and other regulatory bodies have struggled to keep pace with the growth of digital assets in the country.
In September 2023, Nigeria’s SEC declared Binance Nigeria Limited illegal, stating that the platform was neither registered nor regulated by the commission. Binance, one of the world’s largest crypto exchanges, has faced increasing scrutiny from Nigerian authorities.
Just a few months earlier, in February 2024, a presidential adviser called for a ban on Binance, KuCoin, and other major crypto trading platforms in Nigeria. This echoed a 2022 move by Nigeria’s central bank, which prohibited financial institutions from providing services to crypto exchanges.
The crackdown on crypto exchanges has raised concerns within the Nigerian blockchain industry, particularly over the uncertain regulatory environment.
The Blockchain Industry Coordinating Committee of Nigeria (BICCoN) has expressed concern over the legal battles between Binance and the Nigerian government. The committee urged for a balanced approach to resolving the issues, stressing the importance of maintaining a healthy blockchain ecosystem in the country.
BICCoN President Lucky Uwakwe warned that the ongoing legal disputes and the detention of Binance executives had created an atmosphere of uncertainty in Nigeria’s blockchain industry.
“There is a growing fear that these legal battles could scare away potential investors and partners,” Uwakwe said.
In June 2024, US lawmakers French Hill and Chrissy Houlahan visited the Kuje Correctional Center in Nigeria, where Binance executive Tigran Gambaryan was being held.
Hill criticized Gambaryan’s detention, calling it “horrible” and highlighting the health concerns the executive was facing while in custody.
Despite these challenges, Nigeria’s SEC is determined to clean up the crypto industry and make it safer for investors.
“The time has come for Nigeria to take a strong stand against crypto fraud,” said a senior official at the SEC. “With these new penalties, we hope to send a clear message to those looking to exploit unsuspecting investors.”
While these new measures may help curb the impact of fraud on Nigeria’s crypto market, they also reflect the growing tension between regulating the sector and maintaining the country’s competitive position in the global crypto space.
The proposed amendments to the Investment and Securities Act are a direct response to the increasing number of scams that have plagued the crypto industry in Nigeria. By raising penalties for crypto-related fraud, Nigerian authorities hope to protect investors and build trust in the sector.
