Tokens but not crypto: Nigeria SEC prepares new digital asset rules

Regulation

Nigeria, one of the world’s most curious nations about cryptocurrencies like Bitcoin (BTC), is preparing new industry regulations for digital asset platforms.

The Securities and Exchange Commission (SEC) of Nigeria is considering allowing licensed digital exchanges to list tokens backed by certain assets, Bloomberg reported on May 1.

According to SEC head of securities and investment Abdulkadir Abbas, the authority plans to only authorize listings of tokens based on assets like equity, debt or property. Cryptocurrencies like Bitcoin (BTC) or Ether (ETH) will not be among those assets, Abbas reportedly said.

Nigeria’s SEC aims to register fintech firms as digital sub-brokers, crowdfunding intermediaries, fund managers and tokenized coins issuers. The authority will not register crypto exchanges until the central bank provides clear regulations for the crypto market.

Abbas noted that license applicants will undergo a year of “regulatory incubation” allowing the SEC to study their operations and renter their services in the country. He added:

“By the 10th month, 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.”

As previously reported, the Central Bank of Nigeria banned local banks from providing services to cryptocurrency-related platforms in early 2021. For the ban, the regulator cited high risks associated with trading cryptocurrencies like Bitcoin. The central bank also promised to implement strict penalties to any lender or financial institution that fails to comply with the directive.

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Despite the ban, Nigeria has emerged as one of the most active countries in terms of adoption and curiosity about Bitcoin and other cryptocurrencies.

According to data from Google Trends, Nigeria ranks No. 2 by search interest for the keyword “Bitcoin,” second only to El Salvador, which adopted Bitcoin as legal tender in 2021. Other jurisdictions in the top-five crypto-curious countries list include Slovenia, Netherlands and Switzerland.

According to Chainalysis’ crypto adoption index, Nigeria was also among the top 20 countries in terms of crypto adoption in 2022.

While prohibiting cryptocurrencies, the Central Bank of Nigeria has been actively promoting its central bank digital currency known as eNaira. Following a sluggish start, eNaira reportedly saw increased adoption due to national fiat reserves facing severe shortages.

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