The Securities and Exchange Commission (SEC) in Nigeria has issued regulatory guidelines for digital currencies and crypto-based companies or startups. The aim, according to Nigeria’s capital market and investment regulator, is to protect investors and create standards for ethical practices.
Also, the Commission will regulate all Digital Assets Token Offerings (DATO), Initial Coin Offerings, Security Token ICOs , and other Blockchain-based offers within Nigeria by Nigerian issuers or by foreign issuers targeting Nigerian investors.
According to a statement released on September 14, 2020, the SEC will be taking a three-pronged approach to regulate innovation in the crypto sector; these are: safety, market deepening, and providing solutions to problems.
The Commission states that it will regulate crypto-token or crypto-coin investments when the character of the investments qualifies as securities transactions.
Every crypto asset in Nigeria will be treated as securities, unless the company or startup proves otherwise. If the SEC determines that a digital asset is not a security, it will not regulate it.
According to the Commission, crypto issuers or sponsors will be required to register their digital assets with the Commission.
First, they are to make an initial assessment filing with the Commission to prove that the assets they issue are securities. Then, there will be a filing for registration proper.
Those that have already issued assets or engaged in ICOs will be given three months to comply with the stated registration requirements.
Consequently, every individual or corporate organisation that engages in any aspect of Blockchain-related and digital asset services must register with the SEC and follow its regulatory guidelines.
“Such services include, but are not limited to reception, transmission and execution of orders on behalf of other persons, dealers on own account, portfolio management, investment advice, custodian or nominee services,” the SEC states.
While this seems to apply to crypto exchanges, crypto-based startups, and even individuals running their own exchange service within Nigeria, the Commission states that it might require foreign or non-resident startups or companies to establish a branch in Nigeria.