Nigeria takes one step further towards the legislation of digital or cryptocurrency assets and Blockchain related services, as the Securities And Exchange Commission (SEC) of Nigeria, clearly detailed how it intends to regulate the sphere.
Cryptocurrencies around the globe have received widespread acceptance. This has, over time, projected unavoidable ambiguities in areas that surround its usage and regulation. While the rise of cryptocurrencies in Nigeria has been filled with enthusiasm, particularly amongst crypto enthusiasts, on the other hand, it seems to have given rise to an even bigger concern.
One very silent but pertinent question remains in the mind of many Nigerian stakeholders: “Will Bitcoin be declared legal or illegal?”.
Nigeria’s Long-Path to Cryptocurrency Legislation
Nigeria reportedly has the world’s third-largest number of digital currency users. Though the government initially aired early skepticisms based on the popularity and allure of the digital asset, the CBN has gradually adopted an intriguing middle-ground approach.
In January 2017, the CBN issued a strict circular to all banks and financial institutions restricting transactions on digital currencies. On account of its volatility, banks and financial institutions were issued a strong warning not to hold, trade or transact in any virtual currency. They pointed out that transactions made in cryptocurrencies are anonymous, untraceable and unregulated, which makes them defenseless against fraudulent activities especially in the aspects of money laundering.
The Nigerian Securities and Exchange Commission(SEC) also made a similar move in 2017. SEC associates Bitcoin with some very popular Ponzi schemes that have hit the country like Onecoin and MMM. They released a statement setting a warning signal to Bitcoin traders to utilize extreme alertness. The statement declares Bitcoin as risky and that it was probably invented to facilitate some “fraudulent pyramid schemes”
February 2018, following the 2017 circular, the CBN reiterated its position on cryptocurrencies. They released a more mildly-worded press release cautioning citizens that cryptocurrencies do not constitute legal tender in Nigeria and, is consequently, a mere gamble, while also emphasising a reluctance to hop into crypto regulation.
However, the Nigerian Deposit Insurance Corporation(NDIC) and the CBN have had plans to adopt cryptocurrency technology. By August 2019, the Fintech Roadmap Committee of Nigeria, constituted by the SEC, submitted the Fintech Report which comprises recommendations with respect to cryptocurrencies. This came following a call for a legal framework to regulate crypto by the Nigerian House of Representatives.
Last year, a committee was set up by the SEC in a bid to create a regulatory framework for digital assets in Nigeria. There seems to be progress, since the committee was set up as the statement received from SEC on 14th September 2020 outlined how cryptocurrency assets will be regulated.
Nigeria’s Securities And Exchange Commission (SEC) Statement On Digital Assets Regulation
In a bid to stimulate ethical strategies that ultimately make for a fair and profitable market, the Nigerian government has released a statement which encompasses the regulation of digital assets based on their classifications and how they should be treated.
The statement asserts that the SEC’s stance is that virtual crypto assets are “securities unless proven otherwise”. Thus, the SEC will regulate cryptocurrencies or crypto investments when the characters of the investments qualify as securities transactions. The areas of regulation specified in the statement include:
What will be regulated: This includes all Digital Assets Token Offering (DATOs), Initial Coin Offering(ICOs), Security Token ICOs, and other blockchain-based offers of digital assets within Nigeria
Who will be regulated: This includes any person, either an individual, corporate body or organization, whose activities involve any aspect of digital and Blockchain-related services. Such groups of individuals would be subject to the regulatory guidelines.
Any business or individual planning to launch a digital innovation is requested to fill an initial assessment form, after which the issuer or sponsor must register the digital asset properly.
All digital assets, cryptocurrencies, and any blockchain-based offers of digital assets within Nigeria will be subject to the regulation of the commission.
With the new policy put in place, security risks would be alleviated. The stabilization of the markets would make for better investments for Nigerians.