Nigeria’s markets regulator has produced a set of digital asset rule or cryptocurrencies regulations, indicating that the continent’s most populous country is attempting to strike a balance between outright bans on crypto assets and their unregulated use.
Last year, Nigeria’s central bank prohibited banks and financial organisations from trading with or assisting digital currency transactions.
However, the country’s young, tech-savvy population has embraced cryptocurrencies, for example, employing crypto exchanges’ peer-to-peer trading to circumvent the financial sector prohibition.
The Securities and Exchange Commission of Nigeria (SEC) announced the “New Rules on Issuance, Offering Platforms, and Custody of Digital Assets.”
The shared 54-page paper outlines the registration requirements for digital asset issuers and custodians, as well as classifying the assets as securities subject to SEC regulation.
The market regulator stated that no digital asset exchange would be permitted to support asset trading unless the commission issued a “no objection” finding.
The Central Bank of Nigeria has not commented on this latest development online or in any media outlet even when reached out to.
The SEC’s stance contrasts sharply with that of the Central Bank of Nigeria (CBN), which currently prohibits local financial institutions from transacting with crypto-related enterprises. The new SEC guidelines, for example, mandate that token issuance platforms and exchanges keep trust accounts with receiving banks.
Overall, this step may lend legitimacy to crypto and related enterprises, perhaps opening new avenues for crypto adoption in Nigeria, which is one of the world’s major crypto markets. The SEC’s guidelines may also give the CBN with a framework under which the country’s financial institutions can interact with cryptocurrency.
To begin, companies wishing to offer any type of cryptocurrency product or service in Nigeria or to Nigerians must now get a virtual asset service provider (VASP) licence. This is in addition to any applicable category licences. A digital asset exchange licence, for example, would be required in addition to the VASP permit.
The VASP licence has its own set of requirements. License holders, in particular, must collect self-declared risk acknowledgment papers from users, as well as a disclaimer that investment losses are not covered by any protection fund. VASPs must also follow anti-money laundering and counter-terrorist financing (AML/CFT) guidelines.
A digital asset exchange will have to pay a registration cost of 30 million naira ($72,289), among other fees.
Nigeria launched the eNaira, a digital currency, in October with the goal of increasing banking access. The central bank backs and controls official digital currencies, unlike cryptocurrencies like bitcoin. …