Nigeria Federal Government Set to Regulate Trading in Digital Assets

  • September 15, 2020
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Trading in digital currencies in Nigeria will come under regulation to make it’s transparent and not detrimental to investors, the Securities and Exchange Commission said.

*Digital assets offerings provide alternative investment opportunities for the investing public, ”

SEC said in a statement on its website.

“It is, therefore, essential to ensure that these offerings operate in a manner that is consistent with investor protection,

the interest of the public, market integrity, and transparency.”

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The regulator said it was the responsibility of the issuer or initiator of the digital asset to prove that or isn’t a security.

“The general objective of regulation is not to hinder technology or stifle innovation, but to create standards that encourage ethical practices,” SEC said.

Though cryptocurrencies are gaining popularity in Nigeria, a country of more than 200 million,

they’re not recognized as legal tender by the central bank.

The securities regulator says it’s taking the approach that digital currencies are exchangeable securities.

SEC groups digital assets and their trade as follows:

  • “Crypto Asset- e.g non fiat virtual currency. Treated as commodities if traded on a Recognized Investment Exchange and/or issued as an investment, and is subject to Part E of SEC Rules and Regulations and any other relevant sections and subsequent Rules which will be enacted in future.
  • “Utility Tokens or “Non-Security Tokens” (e.g., virtual tokens. These tokens simply provide users with a product and/or service. Treated as commodities. However, spot trading and transactions in Utility Tokens do not fall under SEC purview unless conducted on a Recognized Investment Exchange and therefore subject to Part E of SEC Rules and Regulations and any other relevant sections and subsequent Rules which will be enacted in the future.
  • “Security Tokens” (e.g., virtual tokens that have the features and characteristics of a security. Represent assets such as participations in real physical underlyings, companies, or earnings streams, or an entitlement to dividends or interest payments. In terms of their economic function, the tokens are analogous to equities, bonds, etc.
  • “Deemed to be Securities pursuant to PART XVII (315) of ISA, “definition of Securities’’. All financial services activities in relation to Security Tokens, such as operating primary /secondary markets, dealing / trading/managing investments in or advising on Security Tokens, will be subject to the relevant regulatory requirements. Market intermediaries and market operators dealing or managing investments in Security Tokens need to be registered/approved by SEC as   CMOs, Recognized Investment Exchanges, or Recognized Clearing Houses, as applicable.
  • “Derivatives and Collective Investment Funds of Crypto Assets, Security Tokens and Utility Tokens.”

Click on the following link for the full statement:

Statement On Digital Assets And Their Classification And Treatment

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