The Nigerian Securities and Exchange Commission (SEC) is preparing to introduce new regulations allowing specific digital asset offerings, while still excluding cryptocurrencies like Bitcoin and Ethereum.
The state of crypto regulation in Nigeria is as unique as it is complex. The Central Bank of Nigeria banned local banks from providing services to crypto companies in 2021, warning of the risks of trading volatile assets like Bitcoin.
This move may have also been motivated by the Central Bank’s interest in pushing the eNaira, Nigeria’s central bank digital currency. The nation is one of the first battlegrounds where traditional central banks try to fight off the new wave of decentralized cryptocurrencies and replace them with their centralized alternative.
Despite this, Bitcoin is more popular in Nigeria than almost anywhere else in the world. According to Blockchain.News, Nigeria ranks 2nd for interest in the search term “Bitcoin.” It is surpassed only by El Salvador, which was the first nation to adopt Bitcoin as legal tender.
Nigeria is also ranked number 11 in the overall ranking for Chainanalysis’ Crypto Adoption Index, which compares the top nations using various metrics to measure crypto adoption.
This move comes in response to the rapidly growing global interest in digital assets and the need to establish a legal framework for digital asset platforms operating within Nigeria.
Abdulkadir Abbas, the head of securities and investment of the Nigerian SEC, reportedly stated that “We always like to start, as a regulator, with a very simple, clear proposal before we go into the complex ones.”
The first proposal in this process would allow digital asset offerings, but only if they are backed by other assets like equity, debt, or property.
The SEC will also process applications for exchanges to operate in a limited fashion in a short, year trial period. By the end of the trial, the commission would decide if the company could acceptably serve the Nigerian people.
However, the SEC will have to come to an agreement with the Central Bank of Nigeria before it can start registering exchanges as it still bans financial institutions from interacting with crypto companies.
Once the new regulations are approved, there may be a new wave of asset-backed digital currencies in Nigeria. The country’s existing interest in digital currencies combined with the bans and red tape tainting decentralized cryptos like Bitcoin, could pave the way for massively successful Nigerian digital assets.
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