Nigeria ignores crypto in major digital asset regulatory decision

In a major regulatory decision, Nigeria’s Securities and Exchange Commission (SEC) is moving forward with trial applications for digital exchanges, with a focus on tokenized offerings backed by assets, rather than cryptocurrencies, according to a story by media outlet Bloomberg.

This decision aims to attract the nation’s tech-savvy populace to local assets, such as equities, and promote market participation in Africa’s most populous country.

However, the Central Bank of Nigeria’s restrictions on cryptocurrency trading persist, keeping crypto exchanges at bay for now.

Tokenized offerings attracting attention in Nigeria

Nigeria’s SEC is considering allowing licensed digital exchanges to offer tokenized coins backed by assets like equity, debt, and property, but not cryptocurrencies.

Abdulkadir Abbas, Head of Securities and Investment Services at the Abuja-based commission, stated that as a regulator, they prefer to start with simple, clear proposals before delving into more complex ones.

This move could potentially attract the younger, tech-savvy population of Nigeria, which accounts for the largest volume of cryptocurrency transactions on peer-to-peer trading platforms outside the US, according to Paxful.

Other countries, such as Singapore, have also experimented with similar asset tokenization projects. Last year, Singapore initiated “Project Guardian,” a pilot led by DBS Bank Ltd., JPMorgan Chase & Co., and Marketnode Pte, which aimed to explore the potential uses of asset tokenization through the creation of a permissioned liquidity pool comprising tokenized bonds and deposits.

Regulatory incubation for digital exchanges

While Nigeria’s SEC is working on registering fintech firms as digital sub-brokers, crowdfunding intermediaries, robo-advisors, fund managers, and tokenized coin issuers, it will not register crypto exchanges until there is an agreement on standards with the central bank.

The central bank had previously ordered commercial lenders not to facilitate cryptocurrency transactions in 2021.

Abdulkadir Abbas revealed that aspiring digital exchanges will undergo a year of “regulatory incubation,” during which they will provide limited services monitored by the SEC.

This period will allow the commission to study the exchanges’ operations and determine their suitability for providing services in Nigeria.

By the 10th month, the SEC should be able to decide whether to register the firm, extend the incubation period, or ask the firm to cease operations.