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What You Need To Know About Nigeria’s SEC Plans To Regulate Crypto Assets



Nigeria takes one step further towards the legislation of digital or cryptocurrency assets and Blockchain related services, as the Securities And Exchange Commission (SEC) of Nigeria, clearly detailed how it intends to regulate the sphere. 

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Nigeria Flag

Cryptocurrencies around the globe have received widespread acceptance. This has, over time, projected unavoidable ambiguities in areas that surround its usage and regulation. While the rise of cryptocurrencies in Nigeria has been filled with enthusiasm, particularly amongst crypto enthusiasts, on the other hand, it seems to have given rise to an even bigger concern. 

One very silent but pertinent question remains in the mind of many Nigerian stakeholders: “Will Bitcoin be declared legal or illegal?”. 

Nigeria’s Long-Path to Cryptocurrency Legislation

Nigeria reportedly has the world’s third-largest number of digital currency users. Though the government initially aired early skepticisms based on the popularity and allure of the digital asset, the CBN has gradually adopted an intriguing middle-ground approach. 

In January 2017, the CBN issued a strict circular to all banks and financial institutions restricting transactions on digital currencies. On account of its volatility, banks and financial institutions were issued a strong warning not to hold, trade or transact in any virtual currency. They pointed out that transactions made in cryptocurrencies are anonymous, untraceable and unregulated, which makes them defenseless against fraudulent activities especially in the aspects of money laundering. 

The Nigerian Securities and Exchange Commission(SEC) also made a similar move in 2017. SEC associates Bitcoin with some very popular Ponzi schemes that have hit the country like Onecoin and MMM. They released a statement setting a warning signal to Bitcoin traders to utilize extreme alertness. The statement declares Bitcoin as risky and that it was probably invented to facilitate some “fraudulent pyramid schemes”

February 2018, following the 2017 circular, the CBN reiterated its position on cryptocurrencies. They released a more mildly-worded press release cautioning citizens that cryptocurrencies do not constitute legal tender in Nigeria and, is consequently, a mere gamble, while also emphasising a reluctance to hop into crypto regulation.

However, the Nigerian Deposit Insurance Corporation(NDIC) and the CBN have had plans to adopt cryptocurrency technology. By August 2019, the Fintech Roadmap Committee of Nigeria, constituted by the SEC, submitted the Fintech Report which comprises recommendations with respect to cryptocurrencies. This came following a call for a legal framework to regulate crypto by the Nigerian House of Representatives. 

Last year, a committee was set up by the SEC in a bid to create a regulatory framework for digital assets in Nigeria. There seems to be progress, since the committee was set up as the statement received from SEC on 14th September 2020 outlined how cryptocurrency assets will be regulated.

Nigeria’s Securities And Exchange Commission (SEC) Statement On Digital Assets Regulation

In a bid to stimulate ethical strategies that ultimately make for a fair and profitable market, the Nigerian government has released a statement which encompasses the regulation of digital assets based on their classifications and how they should be treated.

The statement asserts that the SEC’s stance is that virtual crypto assets are “securities unless proven otherwise”. Thus, the SEC will regulate cryptocurrencies or crypto investments when the characters of the investments qualify as securities transactions. The areas of regulation specified in the statement include:

What will be regulated: This includes all Digital Assets Token Offering (DATOs), Initial Coin Offering(ICOs), Security Token ICOs, and other blockchain-based offers of digital assets within Nigeria 

Who will be regulated: This includes any person, either an individual, corporate body or organization, whose activities involve any aspect of digital and Blockchain-related services. Such groups of individuals would be subject to the regulatory guidelines. 

Nigeria’s Securities and Exchange Commission Official Statement On Digital Assets Classifications And Treatment.

Any business or individual planning to launch a digital innovation is requested to fill an initial assessment form, after which the issuer or sponsor must register the digital asset properly.  

All digital assets, cryptocurrencies, and any blockchain-based offers of digital assets within Nigeria will be subject to the regulation of the commission.

With the new policy put in place, security risks would be alleviated. The stabilization of the markets would make for better investments for Nigerians.

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Crypto Assets

Crypto prices drop as global market fear increases



Top cryptocurrency prices have fallen amidst a drop in stocks and fears over China’s Evergrande debt crisis. In the last 24hour, Bitcoin dropped from $47,772 to $42,630 shedding about 8.58%. this is the lowest in price since another bull run began on Sept 5 after the April crash.

El- Salvador’s President, Nayib Bukele sees the fall as an opportunity to invest more. Recall that the country adopted Bitcoin as a legal tender on September 7. Despite the adoption, the price of Bitcoin has fallen by almost 14% since then.

Other coins have experienced dramatic crashes within the last 24hours. Solana, a coin that has experienced 355% growth within the last 3 months fell from $162 to $130 shedding about 11.39% within the last 24hours. Solana’s fall may be categorized by the 17-hour outage which the founder, Anatoly Yakovenko said was caused by bots “flooding the networks”

Ethereum fell by 9.37% while Dogecoin and Axie Infinity fell by 11.22% and 14.14% respectively within the last 24hrs hours. While crypto experiences dark Monday, El-Salvador keeps investing more money in Bitcoin.

A look at the global market

The global market is experiencing fear due to the Evergrande debt crisis. A report published by the University of Michigan shows that consumer’s sentiment is beginning to decline. This trend alone may impact the crypto market as well.

On the other hand, the global market downturn must have been spurred by the Evergrande debt crisis. The company grew to be one of China’s biggest companies by borrowing more than $300bn. Last year, Beijing made rules to control the debt owed by big real estate developers. This led Evergrande to offer its properties at major discounts to raise more money to keep the business afloat. Right now, the company is struggling to meet the interest on payment of debts.

Why would it matter if Evergrande fails?

The collapse of the multi-million dollars company would affect the global market; including the crypto market. Many people bought properties from Evergrande and they expect to make gains. If Evergrande falls, crypto investors will be forced to withdraw more money to keep their business running without the means to invest more. When one business fails, the other gets affected indirectly. This also applies to other firms that do businesses with Evergrande.

The potential impact on China’s financial system is another effect of Evergrande’s fall. In his statement to BBC, Mattie Berkink, the Economist Intelligence Unit (EIU), said that “the financial fallout would be far-reaching. Evergrande reportedly owes money to around 171 domestic banks 121 other financial firms” if the company fails, other lenders or businesses may be forced to lend less. Thereby leading to a credit crunch- a situation where companies struggle to borrow money.


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Bitcoin in Africa

The rise of CBDC in African economies



Many nations have taken cues from the world of crypto and its resounding successes over the last decade. In order to avoid getting left behind, governments worldwide are increasingly turning their attention towards implementing some form of digital currency, a CBDC which in full is Central Bank Digital Currency. Although inspired by cryptocurrencies, CBDC’s are quite different from traditional crypto platforms. The main differences are that CBDC’s are unlikely to be decentralized, the supply of this currency regulated by the host’s country’s central bank as the CBDC is designed to operate as a sovereign legal tender, the digitized form of the host country’s fiat currency. Thus, a central bank may issue digitized tokens of its currency of which their value is pegged to the fiat currency of the nation in question, making CBDC’s stablecoins.

Africa has seen a rise in the use of cryptocurrencies and it’s still pushing frontiers in this sector. Although the use of crypto in many African nations is becoming more and more pervasive by the day, the tone of governments in many of these countries toward the sector is cautious at best and threatening at worst. However, a few nations have voiced interests in creating digitized versions of their legal tender to function as a CBDC. Amongst these are Ghana, Nigeria, Morocco, Kenya and Tunisia.

Many of these projects are still in the research phase or developmental phase however. A good example is Ghana’s proposed CBDC, the E-cedi being developed in partnership with German company, Giesecke + Devrient. Nigeria’s CBDC project, the eNaira has been announced and according to Nigeria’s central bank, this CBDC will be launched sometime in 2021. To that end, the CBN has partnered with fintech company, Bitt Inc. to serve as the technical partner in the eNaira’s development. Reportedly, the CBN had made the decision to digitize the Nigerian Naira in 2017.

While the pursuance of digital currencies in African nations is a welcome development, implementation of these schemes isn’t without challenges. Chief among the issues countries in Africa face would be the already existing financial service inequality and poor penetration of internet access in the continent. These challenges must be tackled in order to allow for mainstream adoption of CBDCs and the subsequent provision of financial inclusion. The benefits largely depend on the peculiarities of the nation deploying them. For instance, a digital currency is thought to help Nigeria increase foreign remittances, it’s second largest source of forex after oil. Whatever the outcome of these projects, it is becoming apparent that CBDC’s have come to stay.

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Decentralize Brief

Bitcoin trades above $51k ahead of El Salvador’s adoption



Bitcoin growth

Bitcoin price has rallied above $51,000 ahead of El Salvador’s adoption. The immediate surge in price may be due to the social media campaign that everyone should buy sats of Bitcoin to support El Salvador’s plan to make the coin a legal tender or it may be due to the news of El Salvador’s adoption of the coin as a legal tender on September 7. Users of social media platforms like Twitter and Reddit are discussing how they will buy Bitcoin of $30 each to mark the new El Salvador Bitcoin law.

The surge in Bitcoin’s price began in the last 24hrs with the price rallying around $51,955 with a 3.37% increase. This is an all-time high after the April crash that brought the price of Bitcoin from $64k down to $28k. The move by El Salvador to be the first country that accepts Bitcoin as a legal tender and the social media campaign that leads to a surge in price ahead September 7 are a repetition of events that occurred late last year and early this year with regards to institutional investors and how the price of Bitcoin skyrocketed.

El Salvador, a country in Central America, has been preparing heavily to adopt Bitcoin by installing ATMs to allow citizens to convert the token into US dollars. Last week, the country’s Legislative Assembly passed a law to allow for the creation of a $150m Trust to support the conversion of Bitcoins to US dollars.

To promote the use of Bitcoin, the government states that it will give the adult population of El Salvador $30 in Bitcoin once they download “Chivo” the wallet issued by the government. This was confirmed by the Finance Minister, Alejandro Zelaya.

What this means for Bitcoin investors

Apart from the adoption by Salvadorians, on-chain analytics show that Bitcoin is in high demand. The fourth halving that occurred will make Bitcoin become a scarce token in the nearest future. Thereby increasing the price sporadically.

With El Salvador’s interest in Bitcoin, other countries are likely to follow suit- Panama is considering following El Salvador’s lead. History will repeat itself as this development will serve as another crypto rout that occurred early this year when Tesla and MicroStrategy announced their support for Bitcoin.

El Salvador’s new law allows the use of Bitcoin as a legal tender it can be used to buy goods, pay for taxes and bank loans. This means more demand for Bitcoin, with the fourth halving that occurred, it means less supply. A common rule of economics for demand and supply will apply. Prices are projected to keep rising. At the time of writing this report, Bitcoin is trading at $51,839 with a projection of $52k before the end of today and higher tomorrow when Salvadorians begin to use the token.

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