THE Securities and Exchange Commission (SEC) has released new rules for Digital Assets as part of its effort to regulate digital/virtual assets such as Bitcoins and non-fungible tokens (NFTs).
This is contained in a recently released document titled, ‘New rules on issuance, offering platforms and custody of digital assets’ which some analysts consider essentially as legalising digital assets such as cryptocurrencies in Nigeria.
Venture capitalists are said to be putting millions into digital art, virtual land and online collectibles, the new frontier for investors seeking big returns in crypto.
Digital items known as non-fungible tokens (NFTs) burst into mainstream culture last year, quickly becoming a multibillion-dollar market ranging from computer-generated art pieces to cartoon characters costing thousands of dollars.
Digital Asset Players would now include Digital Asset Offering Platforms (DAOPs), Digital Asset Custodians (DACs), Virtual Assets Service Providers (VASPs), and Digital Assets Exchange (DAX).
The rules apply to all platforms that support the trading, exchange and transfer of virtual assets; all issuers and sponsors of virtual/digital assets, including international and non-residential issuers and sponsors and any operator that aggressively targets Nigerian investors.
The new regulation creates roles for different players in the digital asset space, each playing a key role in the new sector, according to SEC.
The CBN had in February 2021 banned cryptocurrencies stating that it has “no comfort in cryptocurrencies at this time and will continue to do all within its regulatory powers to educate Nigerians to desist from their use and protect our financial system from the activities of fraudsters.”
The Securities and Exchange Commission (SEC) responded that it “has disclosed that there is no policy conflict between the capital market apex regulator and the Central Bank of Nigeria (CBN) over the ban placed on cryptocurrency transactions in the banking industry.”
SEC also stated, “As regards our recent policy pronouncement, it is important to clarify that the CBN circular of February 5, 2021, did not place any new restrictions on cryptocurrencies, given that all banks in the country had earlier been forbidden, through CBN’s circular dated January 12, 2017, not to use, hold, trade and/or transact in cryptocurrencies.”
The rules may help boost trading by giving more clarity on the sector in a country that already ranks as among the biggest markets for digital assets. Nigeria accounts for the largest volume of cryptocurrency transactions outside the U.S., according to Paxful, a Bitcoin marketplace.
Last year, the Central Bank ordered commercial lenders to stop transactions or operations in cryptocurrencies, citing a threat to the financial system. The SEC said at the time it would seek to protect investors and make the market more transparent.
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,” Owen Odia, Country Manager for Nigeria at cryptocurrency exchange, Luno, said by email.
The new rules cover the issuance of digital assets as securities, the registration of platforms and digital asset custodians, exchanges and virtual assets service providers.
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