It would be huge for the African market – a new way of managing payment  in the downstream sector. We received the trademark license from the Nigerian government on FuelPAY and we have built the underlying technology, delivering a wireless  ATG (Automatic Tank Gauge) system at 20% of the cheapest in the market, even with better functionalities.

End-to-end, 100% visibility. We promise you: we can account for the last naira in our system.  Mr. President, we have the total fuel consumption in Abuja in the last 24 hours. Mr Speaker, this is the total revenue generated and potential loss from subsidy. Mr. Senate President, here is the data; no leakage to Benin Republic. Digitizing the downstream sector with local engineering  and financially metering every phase in real time is a call.

Something big is coming – #engineers are coming. FuelPay. Back to the lab, circuits and systems.

There are few things that have caused a major disruption in the Banking and Finance Industry worldwide and throughout the course of history like Cryptocurrencies.

For such a long-time, private individuals and companies have toyed with the idea of being able to store monetary wealth in a way that is simply beyond the reach of Central authorities like a government while being able to carry and spend this wealth anywhere in the world.

This led to the birth of Virtual, Digital or Cryptocurrencies which have left governments baffled and which have created a very grey area legally because they have been unable so far, for the purpose of even taxation or Regulatory tracking, to follow money trails in Cryptocurrency transactions that typically abound with Fiat money/Cash transactions ( “Fiat” money in this case referring to money or currencies given Statutory backing (or Fiat) as Legal tender by a government and which isn’t usually tied value-wise to a commodity like Gold).

This has proved useful in bypassing the Regulatory hassles and bottlenecks that come with carrying money from one country to another or having your funds tracked by your Bank which ultimately renders Currency Transaction Reports (CTRs) to the government.

Cryptocurrency trading has also evolved into a powerful component of the Fintech industry, creating thousands of jobs and leading to the rise of companies in Nigeria(which later became one of the top 10 Cryptocurrency transaction centres in the world) like Patricia and worldwide brands like Binance.

We cannot of course forget the usefulness of Cryptocurrencies in finding Civil dissent as well as seen during the 2020 ENDSARS protests in Nigeria.

Cryptocurrencies have also been proved to be a double-edged sword, with Cryptocurrencies being a very viable means of Money-laundering and payments for all manner of Criminals from fraudsters to hackers to Kidnapping and Drug syndicates to even Terrorist groups and Insurrectionist movements.

This has warranted many governments all over the world placing heavy bans or limitations on the Trading of Cryptocurrencies, particularly on Banks.

In Nigeria, this has led to the ban placed by the Central Bank of Nigeria (CBN) on Cryptocurrency transaction support services previously rendered by Banks, possibly fuelled by frustration on the part of the Federal Government to regulate Cryptocurrencies and due to a feeling of embarrassment over the unrestrained Cryptocurrency-based funding of the ENDSARS project which it could not do much about as well as the failure of its own e-Naira digital currency project.

This ban led to many Cryptocurrency service companies in Nigeria relocating, diversifying into other endeavours, or sadly in some cases, folding up with the consequent mass loss of jobs.

What a lot of people do not know is that Cryptocurrency services can still be legitimately rendered in Nigeria in spite of the CBN restrictions. What this article aims to do is to outline what intending or existing Techpreneurs need to know about legitimately setting up a Cryptocurrency service company, the procedures to follow, and the cost implications if any in the most understandable terms.

Before continuing to read this article, please do not waste your time and stop going through this or sending any further enquiries after reading this if :-

• You are looking for a smarter way to pull off a scam, Ponzi scheme, or any other Financial crime;

• You are seeking for untraceable means of Money-laundering;

• You have absolutely no serious intention to venture into Fintech or Cryptos but you are in the mood for idle “window-shopping” or freebie-seeking enquiries;

• You are seeking for explanations already contained in this article but you’re simply too indolent to read, as this can automatically lead to you being billed for Consultation services;

• You are planning to go into business with the intention of avoiding any Regulatory checks on your operations.

Now that the above requirements have been made clear enough, we can proceed.

1). What are Cryptocurrencies?

Cryptocurrencies are digital currencies in which transactions are verified and recorded by a decentralized system using Cryptography, rather than by a centralized authority.

Think of Cryptocurrencies as currencies not created by government, but are transactions files fueled by actual Fiat money but kept in decentralized systems away from centralized Banking systems. It is like a Digital cloud that doesn’t just store backed-up information on your phone, but actual Monetary transaction verifications and records that are beyond the reach of either banks or governments which you can withdraw as cash from virtually anywhere in the world seamlessly.

Notable examples of Cryptocurrencies include Bitcoin, Shiba Inu, Ethereum, Dogecoin, Ripple and Litecoin among others.

2). What is Blockchain Technology?

This is a structure that stores transactional records known as the “block” of the public in several databases known as “the chain” in a link or network connected through peer-to-peer modes, this storage being typically referred to as a digital ledger.

Think of this as a decentralized non-banking transaction record system that evades Regulatory oversight like under a Central Bank though a decentralized electronic structure.

3. What does the Central Bank ban on Cryptocurrency support services by Banks mean? Does it render Cryptocurrencies illegal?

This is where a major clarification is needed.

The CBN in its January 12, 2017 circular to banks was fuelled by concern over the uncontrollable nature of Cryptocurrencies as well as their high vulnerability to Financial Crimes and terrorism financing, did the following :-

a). Banned banks from trading in Cryptocurrencies;

b). Ordered that Cryptocurrency operators must have AML/CFT(Anti-Moneylaundering/Combating the Financing of Terrorism) controls especially customer identification, verification and transaction monitoring requirements;

c). Ordered the closing of Cryptocurrency-transaction accounts suspected of circumventing regulations;

d). Ordered that STRs (Suspicious Transaction Reports) had to be rendered;

e). Stated that Cryptocurrencies were NOT Legal tender in Nigeria.

What this meant was that while Cryptocurrency transactions were not Legal tender(and thus lacking in legal protection as reiterated by another CBN circular to banks dated the 28th of February, 2018), Cryptocurrencies were not illegal and that Cryptocurrency operators could still operate Cryptocurrency transaction accounts with Banks subject to strict AML/CFT regulations.

Things got worse however when in a more recent circular to banks dated the 5th of February, 2021, the CBN, highlighting again the very uncontrollable nature of Cryptocurrencies, did the following :-

• Ordered banks in Nigeria to close all Cryptocurrency transaction accounts immediately;

• Ordered severe regulatory sanctions on Banks in breach of the ban by the CBN.

This circular came with the following legal implications:-

a). Operating a customized Cryptocurrency bank account or debit/credit card service as a bank is no longer possible in Nigeria;

b). Cryptocurrencies are still not legal tender and do not enjoy Legal protection;

c). Cryptocurrencies are still not illegal in Nigeria, but are just not supported in the traditional sense by the country’s banking industry.

So what this means is that trading in Cryptocurrencies is not illegal in Nigeria, but transactions in Cryptocurrencies might not be enforceable in Nigeria as well, a loophole that has been used by Cryptocurrency scammers in the past to defraud their customers who would have been convinced that they have no case, adding more to the “underworld” perception that follows Cryptocurrencies.

The above argument about Crypto transactions is not entirely true legally and this can be proved by the following tips on setting up a Cryptocurrency service company in Nigeria.

4. What is the best option to choose in terms of the type of Cryptocurrency service company to open in Nigeria currently?

You have the options of either a Cryptocurrency exchange ( which is a digital marketplace where you can buy and trade Cryptocurrencies), a Cryptocurrency brokerage (where you can trade in Cryptocurrencies on behalf of clients for a fee) or Peer-to-Peer trading platforms which are Cryptocurrency trading platforms for verified users to trade in Cryptocurrencies with the platform operator acting as a 3rd party regulator.

The best option would be a Peer-to-Peer (or P2P) platform as it provides a much smaller liability exposure for the Cryptocurrency service provider while greatly reducing the possibility of scams (which are very common in Cryptocurrency trading) and being able to operate without dedicated Crypto bank accounts or cards. This is the operating model currently in use by International Cryptocurrency companies like Binance still operating in Nigeria.

5. What are the requirements for setting up a Cryptocurrency P2P platform company in Nigeria?

To set up a Cryptocurrency P2P platform, you need to take the following steps:-

• Register a company with the Corporate Affairs Commission (CAC) of Nigeria. This is a must as any one-man Cryptocurrency trading business or individual Cryptocurrency “trading expert” may very well be a scam especially if he presents himself as a Cryptocurrency brokerage service.

The objects clause of your company must not be stated as just ‘Cryptocurrency trading support services’ but should preferably be wide enough to enable your company diversify its Fintech interests e.g. your company’s objects (main business objectives) can be stated as “Technology-based Financial support services” .

• Develop an App with Two-factor authentication, a well developed escrow software in place to eliminate the possibility of scams on the app, and a Fiat Money (Naira) Bank transfer/card deposit option as a must.

• Have a Cryptocurrency brokerage option for beginner traders with ceilings on trading investments in place if necessary.

• Set up a very stringent Regulatory Compliance network that will involve the Nigerian Financial Intelligence Unit (the NFIU) , the Special Control Unit on Money-laundering (SCUML), the National Information Technology Development Agency (NITDA), the Federal Competition & Consumer Protection and Commission(FCCPC),the Nigerian Investment Promotion Commission(NIPC) if you’re a foreign company coming to invest in Nigeria, the Corporate Affairs Commission (CAC), and the Federal and State Inland Revenue Services for the purpose of rendering statutorily required returns. Make sure to consult an accredited Tax lawyer or administration expert to know about legitimate means of Tax avoidance and holidays/exemptions for start-ups.

This is in addition to the need for a very stringent “Know-Your-Customer” verification framework. Any P2P transaction that doesn’t go through your company’s escrow verification should be automatically termed a Suspicious Transaction Report. This is because the failure or refusal to comply with these Regulatory requirements as a DNFI(Designated Non-Financial Institution) can earn your company Civil and Criminal sanctions.

• Ensure that your Trademarks and Copyrights (such as your App) are registered to prevent infringement.

• If possible and as stated earlier, combine your Cryptocurrency operations with other Fintech services such as Gift card services, Digital Moneylending, Domestic Cash transfer services, Agency Banking, cross- border Foreign exchange remittances or debit card services or payment processing services which you can engage in at a lesser cost by leasing the Fintech licenses of more established companies in the form of Technical Partnership Agreements, SLAs(Service Level Agreements) or Joint Venture or Franchise agreements with International Fintech brands. I know of at least one major Fintech company that combines payment processing and International Money Transfer services with Cryptocurrency transaction services as well another American International remittance and Cryptocurrency service company operating in Nigeria.

6. What are the cost implications of setting up and running a P2P Cryptocurrency trading platform in Nigeria?

These costs vary from person to person based on your Capital and expected profitability. However, the following breakdown can serve as a guide (not a definite statement) of the costs of setting up this particular type of company :-

• Company Incorporation costs( it is advisable that a Cryptocurrency service company has a minimum of 2 starting shareholders with a preferable minimum share capital of 2 million Naira . Incorporation can take up to 6-7 weeks):-
  a). Filing fees (payable to the Corporate Affairs Commission at 10,000 Naira per 1million Naira share capital) – 20,000.00 Naira;

b). Stamp duties (Payable to the Federal Inland Revenue Service) – 15,000.00 Naira;

c). Legal fees – 75,000-80,000.00 Naira;

d). Miscellaneous costs – 5,000.00 Naira .

Sum total :- 115,000.00-120,000Naira(This will be higher if your share capital is higher. Please note also that you’re not paying your share capital to the CAC, you’re just paying filing fees and stamp duties).

• Trademark and Copyright Registration costs :- Trademarks are for protecting your company app names, logos, slogans which are the identifying marks that distinguish your business from others.

Trademark license applications to the Trademarks,Patents & Designs Registry of the Commercial Law Department of the Federal Ministry of Industry, Trade and Investment take about 3-6 months to complete and are in 2 stages – the Search/acceptance stages to determine if the trademark has not been already granted to an earlier applicant , and then the certification stage. It is advisable to break down payments to your lawyer in 2 instalments for the first and second stages.

Trademark licenses last for 7 years and on subsequent renewals last 14 years.

Total costs for Trademark applications (including Legal fees) are in the range of 250,000.00 Naira, though this can be higher especially if the Trademark sought to be licensed is already a foreign trademark in existence.

Copyright applications as applicable to computer software programs under Section 39 of the Copyright Act are to protect intellectual products of your company such as your app codes, design and functionality. Copyright applications take about 60 days and are in 4 stages(the pending,queried, processing and approved stages). Where the copyright is to be owned by the company there must be a letter of transfer from persons involved in the actual production of the software.

Copyright licenses of this nature last for the lifetime of the owner and then 70 years after the death of the owner.

Copyright applications to the Nigerian Copyright Commission can be done personally online for a fee of 10,000.00Naira or through your lawyer at a cost range of 50,000-70,000.00 Naira.

• SLA/Technical Partnership Agreement costs for Fintech license leasing :- This depends on the type of Fintech license you want to lease and it is usually payable upon renewal of the originally granted license by the head company. For example, if you want to leverage on the license of a Payment Processing service provider like Paystack to combine with your Cryptocurrency service because you don’t have the required 100million Naira minimum share capital requirement of the CBN even though the actual license fee is 1million Naira, you can reach a Service Level Agreement or preferably, a Technical Service agreement to leverage on the license of Paystack for a yearly fee of 5 million Naira payable at every renewal stage of the head company, with legal documentation fees amounting to not more than 10% and Legal fees for Technical Partnership proposal documentations sent to these more established Companies on your behalf not going beyond 65,000.00 Naira, all of which can be even more affordable but are strictly based on negotiations between you and your lawyer as well as your company and the head company whose license you wish to leverage on.

Lastly, ensure that you hire at the very least an outsourced Company Secretary/Legal Adviser/Regulatory Compliance specialist to ensure your company’s very serious post-, incorporation AML/CFT/KYC , NITDA Blockchain policy compliance and Data Protection Compliance, as well as CAC compliance records are filed on time and regularly to avoid liability exposures for your business.

The reactions of governments all over the world notwithstanding, the truth is that Cryptocurrencies and Blockchain Technologies have come to stay and will for a very long time dictate the pace of Financial systems. The fact that they offer the innate human desire of privacy and pure control over personal financial resources free from the arbitrary intrusion of government should give Regulatory authorities enough motivation to seek further research into means of digitally ensuring appropriate KYC/AML/CFT compliance requirements are incorporated into Digital currencies in order to pave the way for the era of Digital Fiat money already championed by countries like China.

It is hoped that a decent understanding in the meantime of how to still effectively participate in the Global Cryptocurrency marketplace even from current restrictions in Nigeria has been acquired from this article going forward.