Nigeria’s securities regulator introduces rules for digital assets

Nigeria’s Securities and Exchange Commission (SEC) has released a set of regulations for digital assets, which aims to strike a balance between outright bans on crypto assets and their unregulated use. The move shows that Africa’s most populous country is attempting to find a middle ground for regulating the digital asset space.

Last year, Nigeria’s central bank banned banks and financial institutions from dealing in or facilitating transactions in digital currencies. However, the country’s young, tech-savvy population has eagerly adopted cryptocurrencies and turned to peer-to-peer trading offered by crypto exchanges to bypass the financial sector ban.

The 54-page document published by the SEC, titled “New Rules on Issuance, Offering Platforms and Custody of Digital Assets,” outlines the registration requirements for digital assets offerings and custodians. The rules classify digital assets as securities regulated by the SEC and stipulate that no digital assets exchange will be allowed to facilitate trading unless it has received a “no objection” ruling from the commission.

Furthermore, a digital assets exchange is required to pay a 30 million naira ($72,289) registration fee, among other fees. The central bank has not commented on the regulations, and a spokesperson could not be reached for comment.

The eNaira, a digital currency launched by Nigeria in October 2021, aims to enhance banking accessibility. Unlike cryptocurrencies such as Bitcoin, official digital currencies are supported and regulated by the central bank.

The move towards regulating digital assets in Nigeria comes amidst increasing interest in the space across Africa. Nigeria is the continent’s largest cryptocurrency market, with Paxful, a peer-to-peer Bitcoin marketplace, reporting that Nigeria accounted for over $400 million of its $1.1 billion in Bitcoin trades in 2020.

However, the lack of regulation has resulted in several high-profile scams, including the 2019 Ponzi scheme involving OneCoin, which reportedly defrauded investors of $4 billion globally. In response, regulators across the continent have stepped up efforts to regulate the digital asset space, with South Africa, Kenya, and Ghana among the countries that have either drafted or implemented regulatory frameworks for cryptocurrencies.

Overall, the Nigerian SEC’s release of regulations for digital assets marks a positive step for the crypto industry in Nigeria. The rules may bring clarity and legitimacy to the industry, which could attract more investment and foster innovation. Nonetheless, the success of the regulations will depend on their effective implementation, which will require collaboration between the regulators and the industry players.