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SEC Begins Regulation of Cryptocurrency Assets to Ensure Transparency

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Nigeria’s Securities and Exchange Commission (SEC) has announced that it will commence the regulation of trade in cryptocurrency assets to protect investors and ensure market integrity and transparency.

SEC said in a statement that digital assets offerings provide alternative investment opportunities for the investing public, noting that 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.

It explained that 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 position of the commission is that virtual cryptocurrency assets are securities unless proven otherwise. Thus, the burden of proving that the cryptocurrency 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,” it said.

SEC said Section 13 of the Investment and Securities Act, 2007 conferred powers on it as the apex regulator of the Nigerian capital market to regulate investments and securities business in Nigeria.

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“In line with these powers, the SEC has adopted a three-pronged objective to regulate innovation, hinged on safety, market deepening and providing solution to problems. This will guide its strategy, its regulations and its interaction with innovators seeking legitimacy and relevance. Consequently, the SEC will regulate crypto-token or crypto-coin investments when the character of the investments qualifies as securities transactions”.

The commission explained that issuers or sponsors are expected to satisfy the burden of proving that the virtual assets do not constitute securities by making an initial assessment filing.

“However, where the finding of the commission is that the virtual assets are indeed securities (not structured to be exclusively offered through crowd funding portals or other exempt methods), then the issuer or sponsor must register the digital assets,” the regulator added.

SEC stated any person, (individual or corporate) whose activities involve any aspect of Blockchain-related and virtual digital asset services, must be registered by the commission and as such, will be subject to the regulatory guidelines.

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“Such services include, but are not limited to reception, transmission and execution of orders on behalf of other persons, dealers on own account, portfolio management, investment advice, custodian or nominee services,” it said.

SEC said all digital assets token offering (DATOs), initial coin offerings (ICOs), security token ICOs and other Blockchain-based offers of digital assets within Nigeria or by Nigerian issuers or sponsors or foreign issuers targeting Nigerian investors, shall be subject to the regulation of the commission.

“Existing digital assets offerings prior to the implementation of the Regulatory Guidelines will have three months to either submit the initial assessment filing of documents for registration proper, as the case may be,” said.

The regulation of cryptocurrency assets and token offering by SEC is coming at the right time as Nigeria continues to lead the continent in trading digital assets.

Data from Usefultulips shows that peer to peer bitcoin trading volumes for the week (1st week of August) topped an equivalent of $95 million.

A break down of the $95 million by region shows that North America is leading with $28.7 million. The United States takes the lion’s share of that figure.

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The Sub-Saharan Africa region comes second with $18.3 million worth of bitcoin have being traded between peers in the period under review.

A further breakdown of the $18.3 million reveals that Nigeria leads the Sub-Saharan Africa region. According to the data, Nigerian peer to peer bitcoin trading volumes topped an equivalent of $9.8 million. The figure is slightly below the $10.3 million recorded in the week earlier.

Kenya is a distant second with $3.2 million worth of trades while South African peer-to-peer trading volumes topped $2.8 million.

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