SEC Nigeria Releases New Rules for Custody and Issuance of Digital Assets

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Key Takeaways

  • The rules document is titled “New Rules on Issuance, Offering Platforms and Custody of Digital Assets”.
  • Nigeria is among the biggest markets for digital assets and the new rules are expected to bring more transparency in the crypto sector.
  • New SEC regulation lacks exposure draft and covers the issuance of digital assets as securities, the registration of platforms and digital asset custodians, exchanges, and virtual assets service providers.

The Securities and Exchange Commission Nigeria recently published a document titled “New Rules on Issuance, Offering Platforms, and Custody of Digital Assets” on its website. The new SEC regulation, however, has come out without an exposure draft. 

The document is divided into 5 sections and cover Rules on Issuance of Digital Assets as Securities, Rules on Registration Requirements for Digital Assets Offering Platforms (DAOPs), Rules on Registration Requirements for Digital Asset Custodians (DACs), Rules on Virtual Assets Service Providers (VASPs) and Rules on Digital Assets Exchange (DAX).

According to the new rules, the registration requirements of digital assets require a registration statement, KYC procedures, Security protocol, a Solicitor’s opinion, a Copy of the escrow agreement, Corporate governance disclosures, and Evidence of payment of the applicable fees.

The regulations also require applicants to pay N100,000 for the filing or application fee, N300,000 for the processing fee, N30 million for the registration fee, and N100,000 for sponsored individuals fee. These fees are to be paid in a bank account operated by the SEC.

The new rules are expected to boost trading by giving more clarity on the crypto sector in Nigeria. The country is already one among the biggest markets for digital assets and accounts for the largest volume of cryptocurrency transactions outside the United States, according to Paxful. In 2021, the central bank ordered commercial lenders to stop transactions or operations in cryptocurrencies, citing a threat to the financial system’s stability. The SEC stated at the time that it would seek to protect investors and make the market more transparent.

 Owen Odia, who holds the post of the country manager for Nigeria at cryptocurrency exchange Luno said, “Since launching in Nigeria in 2015, we have always prided ourselves on consistently adopting an open and proactive approach towards regulation, and with the SEC’s new framework, our hope is that our current and potential users will have even greater confidence to trust us with their funds as we strengthen our push to raise the standards of our industry,”

The regulations “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,” she added. Luno has more than 3 million customers in Nigeria and secures an average of over 4,000 downloads of its app per day in the country alone.

In February 2022, stakeholders in Nigeria’s blockchain and crypto industry were invited by an NFIU-led Virtual Assets Workstream over a National Assessment Risk. The NFIU is the central national agency mainly responsible for the receipt of disclosures from reporting organisations, the analysis of the disclosures, and the production of intelligence for dissemination to competent authorities. 

The draft proposals also followed the threat of sanction by the Financial Action Task Force if the African country fails to improve its anti-money laundering and combating the financing of terrorism regulations before October 2022. The SEC may have accelerated the release of the regulation keeping in mind the FATF threat.

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Saniya Raahath
Saniya Raahath

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