Nigeria’s SEC recognises cryptocurrencies as securities

Crypto assets have been defined as securities “unless proven otherwise”

Image of Lagos, Nigeria
Victoria Island is the main business and financial centre of Lagos, Nigeria

Nigeria takes another step forward in integrating cryptocurrencies by formally defining digital assets under its regulatory umbrella.

On September 14, the Nigerian Securities and Exchange Commission (SEC) released a statement that provided a definition for tokens and coins in the country’s financial markets. For enhanced regulatory oversight, the assets would be divided into four different categories.

“Virtual crypto assets are securities unless proven otherwise. The burden of proving that the crypto assets proposed to be offered are not securities and therefore not under the jurisdiction of the SEC, is placed on the issuer or sponsor of the said assets,” the SEC stated.

Regulators in the country will be in charge of registering and approving all digital assets, which are said to be an avenue for “alternative investment opportunities.”

Security tokens fall under securities, while derivatives and investment funds are “specified investments”.

The SEC clarified that it would not be the entity responsible for monitoring utility token spot trading and transactions.

“The SEC will regulate crypto-token or crypto-coin investments when the character of the investments qualifies as securities transactions,” the announcement said.

All cryptocurrency and blockchain businesses that have been releasing Digital Asset Token Offerings (DATOs), Initial Coin Offerings (ICOs), and/or Security Token Offerings (STOs)  within Nigeria before the implementation of these new laws have been given three months to register with the SEC.

“The registration process for virtual assets will therefore involve a two-prong approach – an initial assessment filing to satisfy the burden of proof and a filing for registration proper, either made directly by the issuer or sponsor or where the burden of proof is not satisfied,” the announcement explained.

The Nigerian SEC has not released many public statements regarding the use of cryptocurrencies. Its last statement on the matter was in 2017 when the commission cautioned citizens in their approach towards investing in cryptocurrencies since it could lead to a financial loss on their part without the protection of the regulatory body.

This move to regulate the market is a response to a significant spike in interest towards the industry from Nigerian citizens. According to Google Trends, Nigeria consistently takes top spot worldwide for online searches on “Bitcoin”. Alongside South Africa and Kenya, the three countries also have the most monthly crypto transfers on the continent, which total approximately $316 million as of June 2020.

“The general objective of regulation is not to hinder technology or stifle innovation, but to create standards that encourage ethical practices that ultimately make for a fair and efficient market,” the SEC said.

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