People & Money

SEC Moves to Regulate Crypto-currencies, Other Digital Transactions

The Nigerian Security and Exchange Commission (SEC) has joined other countries of the world to regulate cryptocurrencies and digital based companies.
The move is to create guidelines and structure to ensure investor protection, market integrity and transparency.
Exercising its rights under Section 13 of the Investment and Securities Act, 2007 to regulate investments and securities businesses in Nigeria, the body said it “will regulate crypto-token or crypto-investments when the character of the investments qualifies as securities transactions”. Every virtual crypto-assets are securities unless proven otherwise, according to SEC. Once the commission has confirmed that the virtual assets are securities, then the issuer or sponsor is obliged to register them as digital assets. “The registration process for virtual assets will therefore involve a two-prong approach – an initial assessment filing to satisfy the burden of proof and a filing for registration proper, either made directly by the issuer or sponsor or where the burden of proof is not satisfied”
In January 2017, the CBN passed a circular to all banks stating that all transactions involving digital currencies are banned in the country.
Also in 2017, SEC warned investors that no digital companies had registered with it hence they should not be trusted. However, the geometric increase in the adoption of blockchain-based cryptocurrency has necessitated its regulation.
Nigeria is one its biggest market in Africa and the world.
Recently, Coinmarket cap, a cryptocurrency price tracking platform indicated that the monitoring of cryptocurrencies in Nigeria has grown to 211%.
Bitocoin.com also reported that 11% of connected Nigerians make use of cryptocurrencies.
According to reports, a cryptocurrency exchange platform in Nigeria, Buycoins, processed more than N500m worth of cryptocurrency in 3 months.
There has been a surge in peoples’ interest because a lot of Nigerian youths depend on remittances for their livelihoods. Also, transactions based on digital currencies attract very low charges.
Chainalysis, a US blockchain research firm reported that monthly cryptocurrency transfers to and from Africa of under $10,000 increased more than 55% year on year reaching $316m. In the same vein, transfers of small cryptocurrencies summed up to $56 m , indicating 50% year on year increase.
In its new regulations, SEC has mandated all crypto-based start-ups to register with it and foreign based digital companies must have a branch in Nigeria to operate.
Need for regulation
There are concerns that fraud and money laundering will be perpetrated with cryptocurrencies.
Recently, a famous American Rapper, Clifford Joseph Harris (TI), was charged with fraud by America SEC following his sale of crytocurrency token leveraging on his huge fan base. The Atlanta groomed 39 year old allegedly lured his fans into investing in the 2017 Flik initial coin offering (ICO).
But analysts opine that if well regulated, cryptocurrency can catalyse social and economic growth globally by enhancing access to capital and financial services.
Other countries where crypto-based transactions are regulated include Japan, Malaysia, Singapore, China, Spain, Germany, India, the Philippines, the U.S, and South Korea).
Prominent fintechs using cryptocurrency in Nigeria are Patricia, Finance, Buycoins and Quidax etc. These e-commerce companies offer different services like, savings and investment, money transfer, mobile payments

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