Nigeria: We're Well Equipped to Regulate Crypto Assets, Says SEC

21 September 2020

The Securities and Exchange Commission (SEC) has said the decision to regulate digital assets is part of determination to protect investors, explaining that it has the capacity to achieve the objective.

SEC had last week unveiled guidelines that would lead to regulation of regulating trade in crypto assets in the country, saying because digital assets offerings provide alternative investment opportunities for the investing public.

Speaking further on the development, Head, Registration, Exchanges, Market Infrastructure and Innovation, at SEC, Mr. Emomotimi Agama, said the commission wants to make sure that the market is safe and everyone is comfortable with what is going on in the investment climate.

He explained that last year, SEC launched the fintech roadmap and after which it went ahead to set up the block chain virtual financial assets committee.

"These committees are both market wide and principally done to engage the market, to be able to have discussions with the market and get their buy-in into what we are doing.

"What we found out today is that a lot of persons, youths are all involved in this space and it is important that even as far as that is the case, the SEC lives up to the expectations that the Nigerian public has of it which is investor protection and making sure that those people that are getting into the business, the investors are protected.

"Clearly, that is our aim and the market is part of this and indeed the feedback has been wonderful. People are happy with what we are doing, being able to provide some clarity as to where we stand in terms of digital assets regulation," he said.

Agama explained said before coming out with the initiatives, SEC did so much research, adding: " I need to tell you that the Cambridge Centre for Alternative Finance has been partnering with the SEC and up to this point, we have been engaging with them and several of our staff members have been part of their programmes."

"The World Bank and other institutions are also working with us on Fintech to see that the Nigerian landscape is not left barren but guided with basic principles, we will not leave any stone unturned, but ensure that everyone within the SEC that has the responsibility to guiding investors and the populace in making sure we have an investment environment that people will be proud of is provided.

"Capacity building is a continuous exercise, we will continue to upgrade ourselves, we will continue to learn because knowledge is for life," Agama stated.

SEC had explained that the general objective of regulation was not to hinder technology or stifle innovation, but to create standards that encourage ethical practices that ultimately make for a fair and efficient market.

"The position of the commission is that virtual crypto assets are securities, unless proven otherwise. Thus, the burden of proving that the 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 had stated.

SEC said Section 13 of the Investment and Securities Act, 2007 conferred powers on the it 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.

"The commission explained 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, where the finding of the commission is that the virtual assets are indeed securities (not structured to be exclusively offered through crowd funding portals or other exempt methods), then the issuer or sponsor must register the digital assets," the regulator had added.

SEC stated any person, (individual or corporate) whose activities involve any aspect of Blockchain-related and virtual digital asset services, must be registered by the commission and as such, will be subject to the regulatory guidelines.

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