Nigeria’s Securities and Exchange Commission (SEC) will begin to regulate digital currencies and crypto-based companies, the Commission noted in a statement this week. I want to wish the Commission good luck. My understanding is that Nigeria is still struggling on how to collect VAT on digital companies which do business exclusively online; this new playbook may be harder. But it has to be done because Nigeria is a country. Good luck.
Similarly, 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 (3) months to either submit the initial assessment filing or documents for registration proper, as the case may be.
The SEC hereby categorizes the following virtual assets/instruments as follows:
| S/N | VIRTUAL DIGITAL ASSET | TREATMENT |
| 1. | Crypto Asset- e.g non fiat virtual currency.
|
Treated as commodities if traded on a Recognized Investment Exchange and/or issued as an investment, and is subject to Part E of SEC Rules and Regulations and any other relevant sections and subsequent Rules which will be enacted in future |
| 2. | Utility Tokens or “Non-Security Tokens” (e.g., virtual tokens. These tokens simply provide users with a product and/or service. |
Treated as commodities. However, spot trading and transactions in Utility Tokens do not fall under SEC purview unless conducted on a Recognized Investment Exchange and therefore subject to Part E of SEC Rules and Regulations and any other relevant sections and subsequent Rules which will be enacted in future |
| 3. | Security Tokens” (e.g., virtual tokens that have the features and characteristics of a security. Represent assets such as participations in real physical underlyings, companies, or earnings streams, or an entitlement to dividends or interest payments. In terms of their economic function, the tokens are analogous to equities, bonds, etc. |
Deemed to be Securities pursuant to PART XVIII (315) of ISA, “definition of Securities’’. All financial services activities in relation to Security Tokens, such as operating primary / secondary markets, dealing / trading / managing investments in or advising on Security Tokens, will be subject to the relevant regulatory requirements. Market intermediaries and market operators dealing or managing investments in Security Tokens need to be registered / approved by SEC as CMOs, Recognized Investment Exchanges or Recognized Clearing Houses, as applicable. |
| 4. | Derivatives and Collective Investment Funds of Crypto Assets, Security Tokens and Utility Tokens |
Regulated as Specified Investments under the ISA & SEC Rules and Regulations. Market intermediaries and market operators dealing in such Derivatives and Collective Investment Funds will need to be registered / approved by SEC. |
Signed
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What expertise and knowledge does SEC possess in the cryptocurrency and blockchain domain to be able to regulate it? Or you think by mumbling words in a form of document, you now have what it takes to regulate a sector that is nowhere near maturity?
Except they want to close down the sector, nothing shows that SEC knows what it’s saying there.
Candidly Francis, they really do not know. We held several meeting with them to ensure this, and they really do not know. They just have to do it because as Ndubuisi said “Nigeria is a country”… One of their top executive who had some vast knowledge ensured the news came to light.
These guys are so funny.
Reminds me of a certain State that wanted to tax “digital content produced and or consumed in the territory situate or lying within Lagos State.”
Like, the sheer idiocy of situating digital content/platform and geographical location in the same sentence had me laughing for days.
A broke government scavenging for revenue. They will never invest in production infrastructure, but they will want to dip their hands into the pocket of producers in search of revenue.
The Nigerian government today, both Federal and most states, is a robbery!