Last Updated on September 15, 2020 by Ope Quadri
- Cryptocurrency issuers will now be required to register their digital assets with the Securities and Exchange Commission (SEC)
- Nigeria will now regulate all Digital Assets Token Offerings (DATO), Initial Coin Offerings, Security Token ICOs , and other Blockchain-based offers
After several years of ban and warnings to Nigerians not to indulge in cryptocurrency-based businesses, Nigeria’s capital market and investment regulator, Securities and Exchange Commission (SEC), has agreed to adequately regulate the activities of the digital currencies in the country.
This means that cryptocurrency trading platforms that operate in Nigeria or that are targeting Nigeria traders and investors would be mandated to register with the regulatory body.
In the regulatory guidelines made public by the SEC on September 14, 2020, crypto-based platforms, digital assets, ICOs are now mandated to get SEC certifications.
How Nigeria Will Treat Cryptocurrency Moving Forward
Nigeria’s capital market and investment regulator will regulate all Digital Assets Token Offerings (DATO), Initial Coin Offerings, Security Token ICOs , and other Blockchain-based offers within Nigeria by Nigerian issuers or by foreign issuers targeting Nigerian investors.
SEC stated that it would regulate crypto-token or crypto-coin investments when the character of the investments qualifies as securities transactions. As such, cryptocurrency-based firm will be required to register with SEC moving forward.
Moving forward, every crypto asset will be treated as securities, unless the company or startup proves otherwise.
If the SEC determines that a digital asset is not a security, it will not regulate it.
Henceforth, SEC pointed out that cryptocurrency issuers or sponsors would be mandated to register their digital assets with the Commission.
Aims of Crypto Regulations in Nigeria
According to SEC, the aim of the regulation is to protect investors and create standards for ethical practices.
SEC also said the new regulation would provide safety, market deepening and providing solutions to problems.
It said in a statement that, “Such services include, but are not limited to reception, transmission and execution of orders on behalf of other persons, dealers on own account, portfolio management, investment advice, custodian or nominee services”.
So, Who Will Be Regulated?
The three sets of people will be regulated by the regulatory body:
1) Any person, (individual or corporate) whose activities involve any aspect of Blockchain-related and virtual digital asset services like reception, transmission and execution of orders on behalf of other persons, dealers on own account, portfolio management, investment advice, custodian or nominee services.
2) Issuers or sponsors (start-ups or existing corporations) of virtual digital assets. The Commission may require Foreign or non-residential issuers or sponsors to establish a branch office within Nigeria.
However foreign issuers or sponsors will be recognized by SEC where a reciprocal agreement exists between Nigeria and the country of the foreign issuer or sponsor.
3) A recognition status will also be accorded, where the country of the foreign issuer or sponsor is a member of the International Organization of Securities Commissions (IOSCO).
So, what’s virtual crypto assets to SEC?
According to the regulatory body, “Crypto Asset” means a digital representation of value that can be digitally traded and functions as:
- a medium of exchange; and/or
- 2 a unit of account; and/or
- 3 a store of value, but does not have legal tender status in any jurisdiction.
“A Crypto Asset is – neither issued nor guaranteed by any jurisdiction, and fulfils the above functions only by agreement within the community of users of the Crypto Asset; and Distinguished from Fiat Currency and E-money,” SEC says.