The Securities and Exchange Commission (SEC) in Nigeria is planning to allow the trading of asset-backed tokens on digital exchanges, but not cryptocurrencies. This measure has been put in place to regulate the growing cryptocurrency industry in the country and to promote the use of blockchain technology and asset-backed tokens.
Asset-backed tokens are digital tokens that represent ownership in tangible assets, such as real estate, commodities, or shares in a company. These tokens are becoming increasingly popular in the financial industry as they enable fractional ownership, increased liquidity, and easier transferability of assets.
The SEC’s decision to allow the trading of asset-backed tokens on digital exchanges comes after several rounds of consultations with stakeholders in the industry. The regulator hopes that this move will encourage more investment in the country and boost the growth of the Nigerian economy.
However, the SEC remains skeptical of cryptocurrencies, citing their lack of regulation and the risks associated with investing in them. Cryptocurrencies are a form of digital currency that use encryption techniques to control their creation and verify transactions. Bitcoin, the most widely known cryptocurrency, has gained notoriety for its volatile price fluctuations and its association with illegal activities such as money laundering and drug trafficking.
Despite the SEC’s reservations about cryptocurrencies, the Nigerian government has taken steps to encourage the growth of the industry. In February 2021, the Central Bank of Nigeria (CBN) issued a directive prohibiting banks from facilitating cryptocurrency transactions. The move sparked widespread criticism from the cryptocurrency community, with many arguing that it would stifle innovation and development in the industry.
The CBN’s directive was also criticized for its potential impact on financial inclusion in the country. Nigeria has one of the highest rates of unbanked citizens in the world, and cryptocurrencies have been touted as a way to provide banking services to those who are excluded from traditional financial institutions.
The SEC’s decision to allow the trading of asset-backed tokens on digital exchanges may help to alleviate some of the concerns raised by the CBN’s directive. By allowing the trading of asset-backed tokens, the SEC is promoting a more regulated and transparent form of investing in the blockchain industry.
The SEC’s decision is expected to have a significant impact on the blockchain industry in Nigeria, which has been experiencing rapid growth in recent years. Nigeria’s tech sector is booming, and the blockchain industry is seen as a significant contributor to the country’s economic growth.
According to a report by Quartz Africa, Nigeria is the leading country in Africa in terms of cryptocurrency adoption, with more than $400 million traded in 2020. The report also noted that Nigerian cryptocurrency users are some of the most active in the world, with an average trade volume of $1.7 million per week.
The SEC’s decision is expected to provide a much-needed boost to the blockchain industry in Nigeria, as investors are likely to be more confident in investing in asset-backed tokens that have been approved by the regulator.
In conclusion, the SEC’s decision to allow the trading of asset-backed tokens on digital exchanges is a step in the right direction for the blockchain industry in Nigeria. It is a significant move that is likely to promote more investment in the industry, provide greater transparency and regulation, and contribute to the country’s economic growth. However, it remains to be seen whether the regulator will change its stance on cryptocurrency and whether the CBN will modify its directive. For now, the blockchain industry in Nigeria remains in a state of flux, with stakeholders anxiously waiting to see how the regulatory landscape will evolve.
Nigeria’s securities industry is exploring the possibility of allowing tokenized coin offerings that are backed by equity, debt or property, but not cryptocurrency, on licensed digital asset exchanges. The Securities and Exchange Commission in Nigeria is considering the idea, as reported by Bloomberg, with the regulator keen to proceed with a simple, clear proposal before exploring more complex propositions.
Abdulkadir Abbas, head of securities and investment services at the Abuja-based commission, has also confirmed that his department is processing digital exchange applications on a trial basis. These platforms will undergo a year of “regulatory incubation”, allowing the SEC to offer limited services while undertaking regulatory monitoring to determine their fitness to provide the proposed services.
“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 told Bloomberg.
The SEC intends to achieve an agreement with the central bank of Nigeria before registering digital asset exchanges. Nigeria’s central bank recently barred local financial institutions from interacting with crypto service providers, which has been one of the most significant restrictions on cryptocurrency adoption in the region. Nigeria was once considered a significant crypto adopter before the central bank doubled down on its restrictive rules.
While Nigeria’s regulatory environment is not entirely supportive of cryptocurrency, there have been signs of progress. For key stakeholders in the country, there is hope that the SEC will encourage transparency and regulation in digital asset exchanges. Similarly, the CBN is taking an interest in blockchain technology, with the acting governor of the bank recently declaring that it is keen to explore blockchain’s possibilities.
In conclusion, Nigeria’s securities regulator is considering allowing tokenized coin offerings backed by equity, debt or property, but not cryptocurrency, on licensed digital asset exchanges. The regulator is currently processing digital exchange applications on a trial basis, allowing the SEC to offer limited services while undertaking regulatory monitoring to determine the proposed platform’s fitness to provide its services. The SEC intends to achieve an agreement with the central bank of Nigeria before registering digital asset exchanges. Nigeria’s regulatory environment has not always been supportive of cryptocurrencies, but there are signs of progress through exploration and blockchain technology.
