‘Virtual crypto assets are securities, unless proven otherwise,’ the Nigerian SEC said.
The Securities and Exchange Commission of Nigeria has officially defined digital assets under its regulatory umbrella.
In a Sept. 14 statement, the Nigerian Securities and Exchange Commission, or SEC, defined tokens and coins in the country’s financial markets. The commission stated that these digital assets, which provide “alternative investment opportunities”, would be classified into four different categories for regulatory oversight.
“Virtual crypto assets are securities, unless proven otherwise,” said the SEC. “The burden of proving that the crypto 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.”
According to the announcement, Nigerian regulators will register and approve all digital assets, treating cryptocurrencies and utility tokens as commodities. The SEC stated it would not be responsible for overseeing utility token spot trading and transactions. The regulatory body said it would view security tokens as securities, and derivatives and investment funds as “specified investments.”
“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.”
Blockchain and crypto firms releasing Digital Assets Token Offerings, or DATOs, Initial Coin Offerings, or ICOs, and Security Token Offerings, or STOs, operating in Nigeria prior to the implementation of these new regulations will have three months to register with the SEC.
Public statements from the Nigerian SEC regarding crypto and virtual currencies are rare. In early 2017, the commission warned citizens to apply caution in their approach towards investing in cryptocurrencies as they might experience “financial losses” without guaranteed protection from the regulatory body.
However, interest in crypto from its citizens may be driving Nigerian regulators to quickly rein in this budding market.
According to Google Trends, the country consistently ranks first worldwide in online searches for “Bitcoin” — more than twice the traffic of Ghana or South Africa. Blockchain analytics firm Chainalysis reported on Sept. 10 that Nigeria, South Africa, and Kenya lead the continent in monthly crypto transfers, which total $316 million as of June. As of writing, Nigeria is also one of the biggest sources of Bitcoin (BTC) trading volume in Africa and one of eight on the continent to host a Bitcoin ATM, as of April.
"In terms of the crypto scene and everything, things are growing very rapidly, really across the continent, but specifically in Nigeria, South Africa, Ghana, and Kenya [...] At this point, it's just a matter of time before it continues to expand outward to the rest of the continent."