Crypto exchanges license difficulty in Nigeria

[Charles-Tim]

I can remember when CBN banned cryptocurrencies in Nigeria in February 2021, the SEC made virtual asset services providers (VASP) guidelines some months after pertaining to bitcoin and other cryptocurrencies exchanges that will register in Nigeria. That should be in forth quarter of 2021 or so. The guidelines or regulation or whatever we call it was about any exchanges that SEC can give crypto license to function as an exchange in Nigeria should have at least 500 million naira capital before they can give licence to the company to function as an exchange.

In 2023, I have read in a news that this guideline can not encourage local exchanges to be established. Today, I read different news online, but also the similar to that 2023 news, that SEC guideline can not encourage local exchanges to be established in Nigeria. That Nigerians will because of this depend most on foreign exchanges.

If someone or group of people that wants to establish an exchange in Nigeria do not have up to that amount of money, did you think that exchange would be secure enough? There are people that would be employed for security purposes and also that to setup an exchange these days would require huge amount of money. I do not know if these people that are complaining are right or wrong. So you have anything to post about this? How much in naira do you think can be a good startup for new exchanges in Nigeria?

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[Makus]

If someone or group of people that wants to establish an exchange in Nigeria do not have up to that amount of money, did you think that exchange would be secure enough? There are people that would be employed for security purposes and also that to setup an exchange these days would require huge amount of money. I do not know if these people that are complaining are right or wrong. So you have anything to post about this? How much in naira do you think can be a good startup for new exchanges in Nigeria?

In my opinion, I suggest that should be the right amount of money a person or group of persons should have as funds for investment into an exchange before they are given the license,  because exchanges are not like traditional banks which can easily set up insurance and we barely hear about bank hacks. But in exchanges, the topic of hack is just a day to day news headline, as hackers are trying every now and then to crack through exchanges.

Here is a link to some hacks on exchanges and crypto wallets
https://www.investopedia.com/news/largest-cryptocurrency-hacks-so-far-year/

Majority of those hacks are more than the expected amount for an exchange startup, so yes I fully agree with the SEC, and just as you mentioned, when running an exchange you'll be needing a very strong programmer/cyber security to work consistently In buildings the best security for their exchange. Just like what happened to ledger and their coin connect. It was after the hack, that they realized that security is something that needs consistent upgrade. In as much as it will be a newly launched exchange, it will be one of the major targets of hackers. For we to be rest assured we are making use of a secured exchange, first of all the developers have to guarantee us by making huge investment in their project.

[Pi-network314159]

If someone or group of people that wants to establish an exchange in Nigeria do not have up to that amount of money, did you think that exchange would be secure enough? There are people that would be employed for security purposes and also that to setup an exchange these days would require huge amount of money. I do not know if these people that are complaining are right or wrong. So you have anything to post about this? How much in naira do you think can be a good startup for new exchanges in Nigeria?

For me I sudjest that amount of $500 for a start up is good or better still they can reduce it to $250, because if you check the numbers of hack that took place in all the exchanges you will discover that the amount is always high. The highest historical hacks is that of ftx which is about $600 according to the link provided by @makus. So exchanges need to have a huge amount of money to start incase of insecurity or hack sothat they can be able to settle workers just like bank, which is under CBN if anything happens to any bank either hack, the bank should be able to provide money to pay their customers because it's not the customers fault but due to bank lacking insecurity.

The importance and benefits of any organisation security and assurance. When your fund is safe with someone it make people attached to that business. People want to be assure or insured or given guaranteed that wether rain or sun there fund is safe. And when that money is not safe then there is no need.

Since bank can not regulate cryptocurrency they just feel that if crypto currency exchange will emerge,  they will have to sign an agreement of trust and refund if any loss accours because it will be bad for financial body like CBN will be in the country and their citizens will no be assured. Because if anything should happen and people are not refunded, the blame will go back to government. That they are available and some group of people came and established an exchange, and people got scammed and they did nothing, making mockery of them. That is why they are imposing that law. But what they would have done is to reduce the price from $500m to maybe $250m

[sokani]

What does it take to set up a local exchange in Nigeria... Write some lines of code, run promos and entice investors with juicy offers, pay social media influencers to shill for you. After you've collected so much money, then you'd come up with a lie that you've been hacked and you'd run away with customers funds.

There some local exchanges when I see their ads on social media, I'd be like... Is there really a trading platform like this in Nigeria?

The VASP guidelines may be harsh and it may not provide a level playing ground for local exchanges, but on a brighter side, it's going to bring some fresh air in the space. I'm not saying we should trust the exchange with our funds, but its going to put the "bad guys" out of business.

I think same thing happened in the banking sector some years ago, when CBN came up with the compulsory N1 billion naira deposit, and banks that couldn't afford the amount had two options and that's to fold or merge with other banks. So any local exchange that really means business and cannot afford the initial capital deposit of N500 million naira to get a licence, will have to merge with others or fold.

[iBaba]

If someone or group of people that wants to establish an exchange in Nigeria do not have up to that amount of money, did you think that exchange would be secure enough? There are people that would be employed for security purposes and also that to setup an exchange these days would require huge amount of money. I do not know if these people that are complaining are right or wrong. So you have anything to post about this? How much in naira do you think can be a good startup for new exchanges in Nigeria?

 I may not have in-depth knowledge about how these capital caps should be for exchange companies to be established in Nigeria, but I also do not see it as too much of a monetary requirement for any serious business man.

For any Company that is out there to make money with Nigerians as far as exchanges are concerned, It is imperative for us to know that these are not physical banks or even traditional banks, but these are online exchanges that do not have any physical outfits here.

So we only have SEC, CBN and NIBSS as our own regulatory agencies and bodies that will poise a security to our money. This is just to ensure that our financial assets are safe and protected with the license cap.

[Kelward]

If someone or group of people that wants to establish an exchange in Nigeria do not have up to that amount of money, did you think that exchange would be secure enough? There are people that would be employed for security purposes and also that to setup an exchange these days would require huge amount of money. I do not know if these people that are complaining are right or wrong. So you have anything to post about this? How much in naira do you think can be a good startup for new exchanges in Nigeria?

500 million naira, na plenty money for exchanges wey wan establish for Nigeria, and to raise di amount go discourage many potential startups, wey get di interest to provide di services for our country. But for dis matter, me I totally support say make any individual or group wey wan start exchange business for Nigeria, to raise di money, because of scams and hacks wey plenty for crypto matters. We de hear of exchange hacks and if e happen na so investors money go just stuck, di exchange go come de give one story or di oda, so I believe say di move na to protect investors money

I wonder weda Patricia, dat Nigerian exchange wey dem hack last year, weda dem pay dis 500m before dem start business? Because if dem pay am down, dem suppose don balance investors dem money finish, although I hear say dem wan do am in batches.

[EluguHcman]

I can't tell about how much that would fit in the best for a venture like that, i can only say that the above #500M amount could be so of alliance of foreign investors to set up local Inventory just for a license sake. However, I think our dear country capitalized the stipulated conditional demands for the exchange commission to buckle up and authenticate their financial and security capacities with an utmost designations platform to serve protective and reputable investment platform and so as to attract clients and the interested competent Investors within the localities.
So I think the exchange platform would offer more reliable feature services after considering the prominent huge amount spent on the cause of venturing Into our local firms.
This could be a formality of our country Nigeria running diligence formats to enhance such inventory to be profitably reliable to its citizens. Although, this rules could exaggerate bridge of foreign investors to establish in our territory.

[Amphenomenon]

I wonder weda Patricia, dat Nigerian exchange wey dem hack last year, weda dem pay dis 500m before dem start business? Because if dem pay am down, dem suppose don balance investors dem money finish, although I hear say dem wan do am in batches.

I don't think Ceo of Patricia ever had this amount of money when he started his exchange, since it all started as most of our local crypto vendors and then move to social media and then to were it is before the hack.

If someone or group of people that wants to establish an exchange in Nigeria do not have up to that amount of money, did you think that exchange would be secure enough? There are people that would be employed for security purposes and also that to setup an exchange these days would require huge amount of money. I do not know if these people that are complaining are right or wrong. So you have anything to post about this? How much in naira do you think can be a good startup for new exchanges in Nigeria?

As still stands now I won't trust any CEX even if they claim to be secured except they have at least a reasonable amount for reserve and with time as these exchanges increases/expand then the Nigeria Sec should set a rule that would make these exchanges increase their reserved money incase of hacks, just we have seen In CEX shut down from hack or other issues while this approach will help secure some reasonable amount of funds for customers incase such ever faces any issues to make them shutdown or hack, customers are usually the ones to take the actual lost when any of these happens while some CEX try to pay them all or some of their money with time others don't even bother.

The rule may seems hard but its better for CEX after everything we have experience from them.

[Pokapoka124]

Belike na the same procedure them still give to open online banks like kuda and Opay. For young tech bros to build their own company for Nigeria nor just easy, you need to get better block to start with. And possibility of getting loan from bank dey very small, them go just use you catch cruise. I nor go say make CBN reduce their requirements because person wey won manage other people money suppose get enough reserve incase anything happen so them fit settle their customers. My own be say make banks dey try give loans to startups to fund their ideas.

[Zanab247]

If someone or group of people that wants to establish an exchange in Nigeria do not have up to that amount of money, did you think that exchange would be secure enough? There are people that would be employed for security purposes and also that to setup an exchange these days would require huge amount of money. I do not know if these people that are complaining are right or wrong.

As long you are going to establish such business in Nigeria, it will never be safe enough to recover your money from such business because if the government discover that you are making huge amount of money from crypto exchange from the country and, the government can decide to come up with renewal of license just to increase the license registration to frustrate your efforts in that business which we have seen some other business cases like that in the country.
 

So you have anything to post about this? How much in naira do you think can be a good startup for new exchanges in Nigeria?

I guess #100 millions will be very okay for a group of people to use to start the business and, it will not be difficult for them to start making profits from the business compare to one person to start the business with that huge amount of money which is not advisable and, it will not be easy for one person to start making good profits from the business because there will be some group of people who will be looking for way to hack some necessary things from the business just to destroy the business.

[Gozie51]

For me the pepper dey even small self as start up. SEC need to increase am to like 1 billion Naira self. Abi how much be binance own, over $ 1billion. So e make sense to keep enough money down incase of these hack here and there and fraud wey dey exist ontop the system. Stake lose about $41 million and dem still dey market no shaking. So I believe say if SEC dey serious and transparent on the amount and investors get trust for the exchange wey go come up, dem go begin transact with them here and dey will grow because naija get the market wella, a large number of investors for binance na naija guys so na trust matter for exchanges wey go come because the security of the exchange wallet is important.

[Gormicsta]

I can remember when CBN banned cryptocurrencies in Nigeria in February 2021, the SEC made virtual asset services providers (VASP) guidelines some months after pertaining to bitcoin and other cryptocurrencies exchanges that will register in Nigeria. That should be in forth quarter of 2021 or so. The guidelines or regulation or whatever we call it was about any exchanges that SEC can give crypto license to function as an exchange in Nigeria should have at least 500 million naira capital before they can give licence to the company to function as an exchange.

In 2023, I have read in a news that this guideline can not encourage local exchanges to be established. Today, I read different news online, but also the similar to that 2023 news, that SEC guideline can not encourage local exchanges to be established in Nigeria. That Nigerians will because of this depend most on foreign exchanges.

If someone or group of people that wants to establish an exchange in Nigeria do not have up to that amount of money, did you think that exchange would be secure enough? There are people that would be employed for security purposes and also that to setup an exchange these days would require huge amount of money. I do not know if these people that are complaining are right or wrong. So you have anything to post about this? How much in naira do you think can be a good startup for new exchanges in Nigeria?

I believe there is no straightforward answer to this tricky problem. Having the minimum capital requirements to establish an exchange can, on one hand, guarantee that the exchanges established have the means to function in a secure and safe manner. However, on the other hand, in a place like Nigeria where the cost of living is relatively low, it may make it challenging for new exchanges to get off the ground. As a result, Nigerians might be compelled to employ unreliable and unsafe foreign exchange services. Both approaches, therefore, have advantages as well as disadvantages.

[Coyster]

If someone or group of people that wants to establish an exchange in Nigeria do not have up to that amount of money, did you think that exchange would be secure enough? There are people that would be employed for security purposes and also that to setup an exchange these days would require huge amount of money. I do not know if these people that are complaining are right or wrong. So you have anything to post about this? How much in naira do you think can be a good startup for new exchanges in Nigeria?

I can understand what the VASP guidelines is all about, dem wan make sure say at least the exchange get liquity first before they start to accept assets from their customers. The thing be say, e no mean say exchange wey get up to that amount and were able to get the license go dey legit, a group of people fit raise that amount, start up their exchange, but dem wan use am take scam people.

Having said that, i no think say any local exchange platform wey no get up to that amount for a start go fit provide good and efficient service to their customers, i know say e go get people wey dey knowledgeable about things like this for our country, but this money na hinderance to them, but the truth be say funds dey important to run this kind business, and if you no get am, maybe you are not ready.

[Briankimp1]

Belike na the same procedure them still give to open online banks like kuda and Opay. For young tech bros to build their own company for Nigeria nor just easy, you need to get better block to start with. And possibility of getting loan from bank dey very small, them go just use you catch cruise. I nor go say make CBN reduce their requirements because person wey won manage other people money suppose get enough reserve incase anything happen so them fit settle their customers. My own be say make banks dey try give loans to startups to fund their ideas.

You talk nothing but the truth but me I even think this 500m should be doubled for sake of financial security to prove that In case of any wahala dem fit shake body the business na capital intensive one make I just talk am as e be, As for bank loans that one go hard oh when banks don dey lay of workers since post covid and a few mergers for some to stay afloat with the help of  CBN, Small businesses need loans Nigeria is a country with limitless opportunities but the youths and everyone interested do not have an enabling environment to carry out various ventures if you mistakenly try going to micro-finance their rates will chase you away.

[Doan9269]

If someone or group of people that wants to establish an exchange in Nigeria do not have up to that amount of money, did you think that exchange would be secure enough? There are people that would be employed for security purposes and also that to setup an exchange these days would require huge amount of money. I do not know if these people that are complaining are right or wrong. So you have anything to post about this? How much in naira do you think can be a good startup for new exchanges in Nigeria?

What the SEC will first put in consideration is the liquidity asset that individual or group of people is having and they will make assessmenet on that before giving approval, am not also surprised that they would have required this much or even more just for them to be able to have a good ground for granting them licence for operation9, this is something very common to most organizations that when they want to seek approval from governments, they must have this strong financial backup to stand in for them because one of the things that will be firstly considered is their liquidity, that's why some prefer merging with others to create a joint business Incase they are not financially up to the required standard.

[Davidvictorson]

If someone or group of people that wants to establish an exchange in Nigeria do not have up to that amount of money, did you think that exchange would be secure enough? There are people that would be employed for security purposes and also that to setup an exchange these days would require huge amount of money. I do not know if these people that are complaining are right or wrong. So you have anything to post about this? How much in naira do you think can be a good startup for new exchanges in Nigeria?

Honestly Charles, 500 million naira capital is not enough in my estimation to establish an exchange in Nigeria. They need more funds run the company and double of it in their reserve incase there is a hack or something so that they will have enough to pay back their customers. I remember Patricia's issue and how up till this moment a good number of their clients are yet to get their funds.

There is no need to complain. Anyone who wants to set up an exchange in Nigeria should be able to think outside the box. They should look out for global partners and funders. I think that a good amount in naira to start up a new exchange in Nigeria should be 6 billion.

[Charles-Tim]

Honestly Charles, 500 million naira capital is not enough in my estimation to establish an exchange in Nigeria. They need more funds run the company and double of it in their reserve incase there is a hack or something so that they will have enough to pay back their customers. I remember Patricia's issue and how up till this moment a good number of their clients are yet to get their funds.

When SEC brought out the guidelines, the naira at CBN rate at the time was not more than ₦450 or lower to a dollar. Dollar on I&E rate now is almost or more than ₦1000. Persistent rise in goods and services have increased and continue to increase and naira declination continues. ₦500 million of that time when SEC brought out the guidelines would be worth over ₦1 million naira of this time if not more. I am not an expert to make such analyses, but I saw the money no high, but Nigerians are complaining while not thinking about the security and safety of people's money.

[Davidvictorson]

but Nigerians are complaining while not thinking about the security and safety of people's money.

I think that the Nigerians that are who are complaining will be the founders. Some of these founders are after their stomach like the one who was paying himself over $150k per month(can't get the exact figure now). From the client's point of view, the other Nigerians like me who understand that the money is not big would know that it is for their security should there be hack. At least they will have the money to pay back. For instance, Binance’s SAFU fund contains $1 billion worth of crypto assets set aside to compensate users in the case of extreme events such as a security breach.

[Makus]

I think that the Nigerians that are who are complaining will be the founders. Some of these founders are after their stomach like the one who was paying himself over $150k per month(can't get the exact figure now). From the client's point of view, the other Nigerians like me who understand that the money is not big would know that it is for their security should there be hack. At least they will have the money to pay back. For instance, Binance’s SAFU fund contains $1 billion worth of crypto assets set aside to compensate users in the case of extreme events such as a security breach.

Bro I feel you. Na the Koko be that, any person wey say e wan shock body for this kind of business e supposed stand em ground well, because exchange business no be like other sole proprietor or joint business. First of all you gats prove to us say you dey prepared for anything wey fit happen because the way hackers don dey penetrate the crypto network e come dey be like say e don dey easy for them and exchanges need to triple their security upgrade on a stead so that as hacker dey work e dey turn more difficult to crack. Aside that no other way again oo, and just as you talk them need to even get reserve fund for emergency situations and that one join, e mean say that amount sef no go even reach because I believe say the exchange na international (public use) so no be only Nigerians go use am. If to say na only us then the amount for emergency fund for reduce small but since na public something my brother we are talking about billions and not in millions again.

[Gormicsta]

Honestly Charles, 500 million naira capital is not enough in my estimation to establish an exchange in Nigeria. They need more funds run the company and double of it in their reserve incase there is a hack or something so that they will have enough to pay back their customers. I remember Patricia's issue and how up till this moment a good number of their clients are yet to get their funds.

When SEC brought out the guidelines, the naira at CBN rate at the time was not more than ₦450 or lower to a dollar. Dollar on I&E rate now is almost or more than ₦1000. Persistent rise in goods and services have increased and continue to increase and naira declination continues. ₦500 million of that time when SEC brought out the guidelines would be worth over ₦1 million naira of this time if not more. I am not an expert to make such analyses, but I saw the money no high, but Nigerians are complaining while not thinking about the security and safety of people's money.

Although it's difficult to predict with certainty what the Naira's future contains, there are a few factors that might be able to stabilize it. First, by lowering inflation and raising productivity, the Nigerian government may seek to strengthen the foundations of the nation's economy. Secondly, in order to lessen the economy's reliance on volatile commodity prices, the government should work to diversify it away from the oil and gas industry. Lastly, the government should endeavor to raise foreign investment and enhance the business environment. These all have the potential to stabilize the Naira and enhance Nigeria's economic prospects.