The Nigerian Securities and Exchange Commission (SEC) has recently published new guidelines indicating that cryptocurrency and every other digital asset are under its jurisdiction.
According to the new rules released by the regulator, digital assets represent assets like debt or equity claims by the issuer.
The new rules, as reported, shed more light on the power of the SEC to regulate the digital asset space in the country and the issuance and custody of assets. These new rules apply to all issuers looking to raise funds through digital asset offerings.
Exchanges Need to Register
As part of the regulators’ drive to oversee the issuance, circulation, and custody of digital assets, exchanges willing to operate in the country must be registered with the regulator by providing all the necessary information and documents required before the operation license will be issued to them.
Additionally, exchanges are also required to obtain licenses for the issuance and transfer of digital assets across the country.
The 54-page rule book highlights the need for crypto exchanges to register with the financial market regulator and furnish the government agency with the required details of listed assets on their platform, risk management, KYC, and disaster management in the event of unprecedented market volatility.
More importantly, the document shows that exchanges need to provide details on sensitive areas like security protocols, the platform’s structure and technology, and the escrow agreement with the custodian of the exchanges’ funds.
According to the document, crypto exchanges operating in the Nigerian space are to ensure that they have all the needed licenses and permits needed for the issuance and transfer of digital assets. Meanwhile, the new rules mandated exchanges to have at least $1,204 (NGN 500,000) and a 25% fidelity bond.
Listing Rules Become Strict
The Nigerian regulator has taken a hard stance on regulating the crypto industry. By its strict guidelines, exchanges need to comply with it before issuing official approval for their operation. The new rule is that exchanges obtain a “no objection” statement from the financial market regulator to list any new digital assets.
Moreover, the SEC also outlined the limits on the exchange’s investment in initial digital offerings. Meanwhile, there is no such restriction on institutional investors.
Retail investors are permitted to invest not more than NGN 200,000 with a total investment limit placed on the retail category that should not be more than NGN 2 million within a year.
The country has been reluctant to allow the crypto industry to operate in recent years due to concerns by the government regulatory body over the volatility of cryptocurrency, despite the mass interest digital assets have generated among the citizens.
As the largest economy in Africa, the new rules came at the right time, following the leading position Nigeria occupies in terms of trade in Africa and cryptocurrency adoption in particular.
Experts believe the new rule is a precursor to further official approval of cryptocurrency adoption in Nigeria.