Cryptocurrency is a digital medium for transactions, all forms of its transactions are done online.
An online ledger called Cryptography is used to document and track every transaction and this is possible due to blockchain. A decentralized technology that enables cryptocurrency use in different systems.
There are over six thousand cryptocurrencies all over the world. Most companies have their coin, and clients can only access their services using these coins.
Crypto use has recorded a significant increase in its usage in recent times. Even with the high usage rate, some countries have banned its usage.
Cryptocurrency has been banned in Nigeria on the 5th of February, 2021 by the Central Bank of Nigeria due to regulation issues.
The ban raised so much outcry especially among the younger population as they were most affected being the greater part of the population who traded with cryptocurrency in Nigeria.
Although Nigeria was the second-highest trader of cryptocurrency, the Central Bank of Nigeria maintained that there’s no regulation in place for its usage in Nigeria as it was introduced through unlicensed means and are therefore not a legal transaction medium in the country.
Cryptocurrency regulation has taken a toll on every governing body all over the world, each, therefore, is using varying regulatory approaches.
Most regulatory bodies are concerned with the accurate monitoring of individual earnings for proper taxation as there are speculations that crypto earnings are not fully reported. Another issue is the Initial Coin Offering regulation.
In September 2020, the Security and Exchange Commission (SEC) charged with making regulations for investments and other securities in Nigeria announced its decision to set regulations on digital assets of which cryptocurrency is a part.
However, the commission was yet to properly enforce regulation until the recent cryptocurrency ban in Nigeria.
The SEC’s regulatory approach focused mainly on the safety of investors and traders, capital market deepening, ensuring that the regulations are implemented and the process legitimized.
This cryptocurrency regulation according to the commission is not to hinder but to ensure that a certain ethical standard is maintained.
As much as blockchain technology ensures a level of orderliness, it is limited in its scope as there are still fraudulent practices.
In the Nigeria Cryptocurrency regulation, SEC stated the various categories of the digital asset and they include, Crypto asset, Utility tokens, Security tokens, Derivative and collective crypto asset, utility asset, security token.
The commission then set out guidelines on who and what will be regulated. Below is the SEC’s directives on what and who will regulate
What will be regulated by SEC?
- The crypto assets viewed as security by the commission. And if crypto assets are not considered security it is the responsibility of the issuer/sponsor of the crypto asset to prove so.
- Issuers/sponsors must register the digital asset before issuing it out and if the issuer maintains that the digital asset is not security, the issuer is required to file an initial assessment filing with the commission. Therefore the registration process is done in two steps: An initial assessment filing to authenticate proof and another filing for the registration proper. The registration can still be done directly if the crypto asset is considered a security by the issuer.
- Also, issuers/sponsors should register all digital assets in use before the regulation within a three months window period. Furthermore, all block-chain based offers in Nigeria or that have Nigeria investors whether owned by Nigerian or Foreign issuers shall be governed by the regulation of SEC.
Who will be regulated by SEC?
The SEC states that any individual or corporate body that uses or offers any Blockchain and digital asset services, must and will be registered with the commission and is bound to abide by its regulatory guidelines.
Also, foreigner issuers can only operate in Nigeria if they are a member of the International Organization of Securities Commission or they are from a country that has an agreement complying with the SEC in Nigeria.
This Nigeria Cryptocurrency regulation is believed by many to have gone a long way in managing and improving the standard of cryptocurrency trade in Nigeria had crypto not been banned by the Central Bank of Nigeria.
Most are still hopeful that the ban will be lifted, but an even greater question is when.
About the author
Chibuzor Elizabeth Chijioke a graduate of Abia State University is a Nigerian-based entrepreneur and content writer. She trained as a digital marketer at Innovation Growth Hub. She is committed to teaching people how to apply technology to better their lives and businesses. She spends her leisure reading sci-fi and fantasy novels.
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