Nigerian SEC recognizes Bitcoin as Securities: Issues new rules to cryptocurrency exchanges

By: Damian Okonkwo

The Nigerian Securities and Exchange Commission (SEC) has recognized Bitcoin and other cryptocurrencies as securities - which means they are a valid store of value for wealth. On this premise, the Nigerian SEC proceeded to publish new rules to regulate all cryptocurrency exchanges operating in the country on their website.

The recent development comes after the central bank had previously banned all commercial banks operating in the country and other financial institutions from facilitating cryptocurrency transactions last year.

Thus, the Nigerian SEC this time seems to be taking a different position from the CBN. While the CBN had taken a hostile attitude towards cryptocurrency transactions in Nigeria, the SEC this time seems to be revitalizing and promoting it again.

As could be seen on the 54-paged document published on their website, the Nigerian SEC laid out the registration requirements for all digital assets exchanges providing crypto services in the country. According to these new “rules on issuance, offering platforms and custody of digital assets” for Bitcoin and other cryptocurrencies, “no digital assets exchange would be allowed to facilitate the trading of assets unless it had received a ”no objection“ ruling from the commission”.

To obtain this “no objection” ruling, the SEC stated that any digital assets exchange seeking to operate in the country will be required to pay the total sum of 30 million nairas ($72,289) as a registration fee, among other fees.

This means all new Cryptocurrency exchanges and other entities looking to offer any kind of crypto products and services in Nigeria or Nigerians will henceforth have to secure a virtual asset service provider (VASP) license. This will be in addition to other relevant category licenses. For instance, an exchange would need a digital asset exchange license in addition to the VASP permit.

The new rule seems much similar to the previous legislation given by the CBN to all commercial banks operating in Nigeria requiring them to pay a certain amount of money to obtain a license to operate in the country.

It is therefore hoped that this step will help to bring sanity to the different cryptocurrency exchanges operating in the country. Nigerians no doubt can legitimately transact with these exchanges once they comply with the SEC's demand.

However, one keeps wondering if the Nigerian government is finally shifting its position on cryptocurrency trading in the country. This means the CBN may likely reconsider its initial ban on the banks from facilitating Cryptocurrency transactions.

Hence, Owen Odia, the country manager for Nigeria at cryptocurrency exchange Luno, said by email that this new regulation “could act as the precursor for a surprise move from the central bank to reverse its approach, providing critical foundations for mass crypto adoption across the country,”

Just last year, Nigeria became one of the leading African countries to promote cryptocurrency global adoption after it created its own Central Bank Digital Currency (CBDC) dubbed the e-naira which was to be used alongside the fiat currency naira. Hence, the move to regulate all exchanges operating in the country could further be the first step final legalization of Bitcoin and other Cryptocurrencies in the country.

Finally, many analysts and economic experts believe that this development could bring more legitimacy to crypto and related businesses within the country and further open new doors for cryptocurrency usage as a means of payment in the country. Added to it, the SEC's new rule could also provide the CBN with a new direction and framework on how the commercial banks and other financial institutions in the country may interact with a cryptocurrency exchange.