Nigeria’s Securities and Exchange Commission (SEC) has put plans to regulate the Nigerian crypto space on hold. It stated that this became necessary given the validity of the Central Bank of Nigeria’s (CBN’s) crypto order.
In a statement released on February 11, 2021, the SEC says will stop accessing all persons and products affected by the CBN’s circular of February 5, 2021, for admission into the SEC Regulatory Incubation Framework.
This will remain the case until Nigerian crypto players are able to operate bank accounts within the Nigerian banking system.
Recall that On September 14, 2020, the SEC recognised cryptocurrency as securities, per Nigerian law. According to the regulator, it did not plan to stifle innovation, but “to establish standards of ethical practices that ultimately make for a fair and efficient securities market”.
Consequently, the CBN’s move to deny crypto players access to banking services seemed like a conflict of regulatory intent. However, the SEC insists that there’s no conflict.
Though the SEC's original plan was to provide regulatory certainty, it maintains that the CBN identified certain risks that will threaten investor protection, if allowed to persist. For the SEC, both regulators have to maintain financial stability.
Consequently, both regulators are reportedly working together to identify the risks and put mitigating measures in place if cryptocurrency investment is allowed in the future.
This statement came just a few hours after the Nigerian Senate offered a possible lifeline for crypto by inviting both the CBN and the SEC for a briefing before some of the Senate’s important committees.
As we pointed out, a major talking point was the seeming conflict in both regulator’s stance, and the lawmakers wanted to hear both sides. However, the SEC is dispelling talks of a conflict, but its stance at the Senate hearing could be a difference maker.
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Regulations for Investment-tech
The SEC will still be implementing its regulatory guidelines for fintech firms that intend to innovate around the country’s Capital markets system.
This will likely apply to investment-tech companies like Chaka, and Trove that are democratising access to local and foreign capital markets.
In December 2020, the SEC initiated a court order restricting Nigerian Investment-tech platform, Chaka Technologies, from offering stocks of foreign and domestic companies to Nigerians.
This order was shocking to both the recipient and the public, but it was seen as a signal for regulations coming into the sector.
Though it seemed like the restriction only applied to those offering Nigerian stocks, a closer analysis of the SEC’s language implies that it could also apply to the likes of Bamboo that currently offer only foreign stocks.
The securities regulator affirms that it will monitor the developments in the crypto and fintech space and engage critical stakeholders to create an innovative, safe, and transparent capital market, and enhance economic developments.
These moves' final outcome still anyone’s guess, but it promises to bring interesting conversations. Keep watching this space.