Nigeria SEC issues new crypto rules confirming digital assets are securities

Nigeria’s Securities and Exchange Commission (SEC) has recently published new rules that will govern the issuance, custody, and exchange of crypto assets. The development is seen as a step toward the legitimacy of cryptos such as Bitcoin (BTC) and Ethereum (ETH) and could promote adoption in Nigeria, one of the leading countries for digital currency adoption.

In the recently published rules, SEC Nigeria affirms its treatment of crypto assets as securities. The regulator defined a digital asset as a "digital token that represents assets such as a debt or equity claim on the issuer,” under the section titled “Rules on Issuance of Digital Assets as Securities.”

SEC’s new set of crypto regulations could signal that Nigeria is trying to find a middle ground between the unregulated use of crypto assets and their outright ban, according to Reuters. The market’s regulator’s position is in contrast to that of the Central Bank of Nigeria (CBN), which banned banks and other financial institutions from facilitating crypto transactions.

SEC’s new set of regulations could provide the central bank with a framework within which Nigerian banks may deal with crypto assets, according to Forbes. At the moment, the country’s young and tech-savvy crypto investors have resorted to peer-to-peer trading platforms to avoid the central bank’s ban.

Entities planning to raise capital through digital asset offerings in the country are required to submit a draft white paper to the SEC for an initial assessment. The paper must include all relevant details such as information on how the project could benefit investors, sustainability and scalability, the distributed ledger technology, token price, use of proceeds, accepted cryptos and assets as payment for the tokens, risks, and others.

The SEC shall determine if the prosed digital asset to be offered constitutes a “security” under the “Investment and Securities Act 2007.”

Under the new rules, retail investors are subject to an investment limit of “N200,000 per issuer with a total investment limit not exceeding N2 million within a 12-month period.” However, the SEC will impose no investment limits for qualified institutional and high net worth investors.

Meanwhile, entities planning to offer crypto products and services in Nigeria will need to secure a virtual asset service provider (VASP) license to operate. Those planning to operate a digital asset exchange (DAX) must comply with requirements on top of the general requirements for VASPs.

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