Why We Issued Regulation On Crypto-Currency, SEC Reacts To CBN Ban

The Securities and Exchange Commision has said that its previous rule on digital assets is consistent with the Central Bank of Nigeria’s recent ban on cryptocurrency.

The capital market regulation had drafted a rule last year puting digital assets under its regulation. But  the Central Bank of Nigeria in a circular of February 5, 2021 directed banks to close accounts linking to crypto currencies.

Some stakeholders and investors had seen the two moves by the money market regulator and the capital market regulator as inconsistent.

For the apex bank, cryptos were being used as tools for money laundering and sponsoring illicit activities.

But the SEC said in a statement dated February 11, that the two directives were consistent and would help strengthen and safeguard investment in the digital asset space.

The SEC said, “The Securities and Exchange Commission has received several comments and inquiries from the public on a perceived policy conflict between the SEC Statement on Digital Assets and their Classification and Treatment of September 11, 2020 and the Central Bank of Nigeria Circular of February 5, 2021. We see no such contradictions or inconsistencies.

In recognition of the fact that digital assets may have the full characteristics of investments as defined in the Investments and Securities Act 2007, the Statement explained that trading in such assets falls under SEC’s regulatory purview, except proven otherwise.

The Commission said both regulators were not trying to hinder or stifle innovation, but to establish standards of ethical practices that ultimately make for a fair and efficient securities market.

It noted that it made its statement to provide regulatory certainty within the digital asset space, due to the growing volume of reported flows.

The Commission said the directive by the apex bank was adequate following risk associated with the digital asset.

It added, “In its capacity as the regulator of the banking system, the CBN identified certain risks, which if allowed to persist, will threaten investor protection, a key mandate of the SEC, as well as financial system stability, a key mandate of the CBN.

“In light of these facts, we have engaged with the CBN and agreed to work together to further analyse, and better understand the identified risks to ensure that appropriate and adequate mitigants are put in place, should such securities be allowed in the future.

SEC said in its Capital Market FinTech Strategy, all affected persons and products affected by the CBN ban on crypto will be put on hold pending when they can access their accounts.

The commission noted,  “For the purpose of admittance into the SEC Regulatory Incubation Framework, the assessment of all persons (and products) affected by the CBN Circular of February 5, 2021 is hereby put on hold until such persons are able to operate bank accounts within the Nigerian banking system.

“The planned implementation of the SEC Regulatory Incubation Guidelines for FinTech firms who intend to introduce innovative models for offering capital market products and services will continue.”

The capital market regulator said it would continue to monitor developments in the digital asset space and continue to engage all critical stakeholders.

SEC said the consultation with stakeholders was with a view to creating a regulatory structure that enhances economic development while promoting a safe, innovative and transparent capital market.