The Security and Exchange Commission (SEC) has proposed a legal framework that will regulate Crypto-token or crypto-coin investments when the character of the investments qualifies as securities transactions.
According to SEC, the proposed regulation was aimed at promoting market efficiency and transparency and not impede the nascent technology.
The apex capital market regulator insisted that virtual crypto assets are securities unless proven otherwise, noting that the burden of proving that 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.
It stated that issuers or sponsors are expected to satisfy the burden of proving that the virtual assets do not constitute securities, by making an initial assessment filing.
However, the commission said where the virtual assets are indeed securities (not structured to be exclusively offered through crowdfunding portals or other exempt methods), then the issuer or sponsor must register the digital assets.
SEC pointed out that all Digital Assets Token Offerings (DATOs), Initial Coin Offerings (ICOs), Security Token (ICOs), and other Blockchain-based offers of digital assets within Nigeria, or by Nigerian issuers, sponsors, or foreign issuers targeting Nigerian investors, shall be subject to the regulation of the Commission.
It added that existing digital assets offerings prior to the implementation of the regulatory guidelines will have three months to submit the initial assessment filing of documents for registration proper, as the case may be.
“Digital assets offerings provide alternative investment opportunities for the investing public; it is therefore essential to ensure that these offerings operate in a manner that is consistent with investor protection, the interest of the public, market integrity and transparency.
“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.
“Section 13 of the Investment and Securities Act, 2007 conferred powers on the Commission as the apex regulator of the Nigerian capital market to regulate investments and securities business in Nigeria.
“In line with these powers, the SEC has adopted a three-pronged objective to regulate innovation, hinged on safety, market deepening and providing solution to problems. This will guide its strategy, its regulations and its interaction with innovators seeking legitimacy and relevance.
“Consequently, the SEC will regulate crypto-token or crypto-coin investments when the character of the investments qualifies as securities transactions,” it added.
Recall that the Central Bank of Nigeria had in February 2018 issued a statement reiterating that cryptocurrencies are not a legal tender and as such are illegal.
The CBN stated that traders risked losing all their money when they trade in a currency that is not regulated.
According to the CBN, the risk is largely associated to the volatile nature of crypto currencies.
In a circular dated February 28th, 2018 and published on its website, the apex bank reiterated that “cryptocurrencies such as Bitcoin, Ripples, Monero, Litecoin, Dogecoin, Onecoin, etc and Exchanges such as NairaEx are not licensed or regulated by the CBN.”
The press release is against the backdrop of Nigeria being among the top 3 countries with the most cryptocurrency trade around the world. Nigerians have caught on to cryptocurrencies in recent times going as far as mining and even launching their own initial coin.
Again in March, 2018, the CBN reiterated its stance on crypto currencies warning traders that digital assets are a mere gamble.