Nigeria’s SEC Moves To Regulate Digital Assets—Excluding Crypto

The Securities and Exchange Commission (SEC), Nigeria’s capital market regulator, is currently drafting regulations for digital asset trading platforms. 

For over two years now, cryptocurrency transactions have been off the table in Africa’s largest economy. In February 2021, the Central Bank of Nigeria (CBN) imposed a ban on crypto trade, barring banks and other financial institutions from enabling digital currency transactions. 

In a bid to bring about harmony between the country’s crypto and banking sectors, the SEC is considering allowing asset exchange platforms to list their tokens. However, the regulator is contemplating tokens backed by specific tangible assets. 

Abdulkadir Abbas, the SEC’s head of securities and investment, said plans are in motion to authorize tokens backed by equity, debt, or property–but not crypto coins like Bitcoin.

Abbas said the authority plans to only authorize listings of tokens based on assets like equity, debt, or property. As such, most likely, assets like Bitcoin will not be covered in the framework, at least not yet. 

“We always like to start, as a regulator, with a very simple, clear proposal before we go into the complex ones,” Abbas reportedly said. 

Abbas said the SEC intends for crypto exchanges to undergo one year of regulatory incubation before they can set up shop in Nigeria. Through the process, the watchdog says it would be able to examine their operations and market fit. 

“By the tenth month, we should be able to make a determination whether to register the firm, extend the incubation period or even ask the firm to stop operation,” Abbas disclosed to Bloomberg.

These firms would register as digital sub-brokers, fund managers, crowdfunding intermediaries, and tokenized asset issuers. Registration for digital exchange will only be authorized when the SEC reaches an agreement with the central bank. 

Despite the CBN’s restrictions, Nigeria has emerged as one of the world’s most crypto-curious nations; the usage of digital currencies soared for months after the ban was enacted. 

While the Nigerian government’s pragmatic approach to cryptocurrency regulation is far from abandoned, the new turn of events, in addition to the launch of a virtual free zone, suggests a checkered change of perception towards the industry.