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Nigeria Ready to Regulate Crypto-currencies

Nigeria will regulate Cryptos

October 5, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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Nigeria's Securities and Exchange Commission has announced it will regulate digital currencies. They are looking to protect investors by ensuring transparent transactions. The commission has proposed a set of rules to regulate the crypto economy. 

The commission is not after hindering technology or stifle innovation. Instead, it is looking to create standards for ethical practices. It is all about a fair and efficient crypto market

Here is all you need to need to know about the impending regulations; 

The Scope of Nigeria's Regulating Cryptos 

Users are still torn on how the regulations work. Given that Nigeria had earlier on denied that cryptos are not money. The rules would only imply when the assets are declared as securities. They will operate as any other stock commodity, which is not money. 

The first process in the regulation is to determine if cryptos are securities. The burden-of-proof lies with the issuer/sponsor. The issuer then files for registration by the commission. 

The regulation covers all the aspects of cryptocurrencies. It regulates all digital tokens and any other block-chain based asset within Nigeria. The existing assets have three months to register with the commission. 

The regulation will affect everyone involved in cryptos in the country. The law requires any person whose activities relate to virtual assets to register. They must then operate within the guidelines of the commission. The regulations apply to both recipient, transmission, and execution of orders. The dealers, investment advisors, and portfolio managers as well. 

The regulation requires issuers and sponsors of assets to work within the commission's guidelines. Foreign suppliers might have to create an office in Nigeria. 

SEC recognizes members of the International Organization of Securities Commissions (IOSCO). They are exempted from registering afresh. 

For proper management, the commission considers crypto a digital representation of value. It says crypto can operate as a unit of account and/or a store of value. Still, it cannot act as a legal tender

No jurisdiction issues cryptos. It only operates as an agreement within the community. It is also distinguished from the fiat currency and e-money. 

Benefits of Nigeria Regulating Cryptos 

Whether to regulate or not has been a contagious issue. Some users prefer crypto due to its decentralized nature. That there is no authority controlling its operations. Still, there has been increasing regulation as Bitcoin becomes mainstream. 
 

Regulation is good news for crypto in Nigeria. Here are the reasons why; 

  • The legitimacy to attract more investors

Nigeria is one of the countries with significant cryptocurrency adoption. It still needs the guidelines of the SEC. The SEC will only regulate it when declared an asset. It means by then, anyone could use it like any other asset. The regulations also mean a welcome attitude from the authorities. 

The regulations are likely to attract more institutional investors. They tend to feel safe with regulations. It reduces the risk of fraud and other crypto concerns. 

The crypto regulations also come with a stabilizing effect. It ensures the crypto does not disrupt the traditional economy. It instead positions it as a viable alternative asset. 

The Nigerians adoption of Bitcoin has been impressive. The country has one of the largest population interested in the countries. Some are yet to adopt the currency due to the uncertainties. The regulations do away with the perceived reservations. 

The regulations are likely to come with the leapfrog effect. The population will adopt digital currency for more practical uses. This is more than just trading and investing. 

The citizens would use it more for online shopping. Several merchants already accept the coins for payments.  

Crypto adoption would solve the banking issue in the country. The country has a large unbanked population. Most of the brick-and-mortar banks are not available in rural areas. Cryptos are accessible through mobile. Anyone, even in the village, would access it. 

  • Cryptos Could Fill a Financial Gap in the Country 

The use of traditional currency in Nigeria is highly restricted. The country makes it hard to spend money even if you have it. Sending foreign currencies into the country also takes some time. 

The country limits the use of spending limits to as low as $100 daily. This is quite limiting for those who rely on the dollar. Most use it for online purchases. They are forced to use the black market. Transacting within the illegitimate market is quite expensive. 

Cryptos don't come with spending regulations. One can access and use them at any time. 
The rules would only give it legitimacy for more trades. 

What Nigeria Regulating Cryptos Mean for the crypto future in Africa 

The impact of crypto regulation in Nigeria goes beyond the country. The country is the crypto pioneer in the continent. It is likely to set the pace on crypto adoption. 

The other African countries are already following their footsteps on adoption. Countries like South Africa and Kenya are following Nigeria closely. Several local crypto startups have come up in these countries. Other crypto firms are also setting up in Africa. 

Nigeria's regulations would act as the benchmark for the continent. Its outcome would impact the continent's crypto use. The successful adoption would see most of the other countries pick it up. 

Nigeria's move also gives the continent the needed positive review. The continent is mostly forgotten in the tech world. 

Nigeria regulating digital money shows the required initiative. It means Africa is willing to claim the same stake as other countries. They are not relying on regulations from other foreign countries. 

The crypto adoption will help solve the persistent financial crisis. Cryptos act as a replacement for the devaluing fiat currencies. Countries like Zimbabwe can use it in place of the country's currency. 

Bottom Line 

The Nigerian government has had a negative perception of cryptos. It had discouraged the citizens from using digital currencies. It's now different from the SEC declaring regulations. 

The regulations will come into effect once cryptos become securities. It shows the future of crypto is great in the country. The rules will also encourage institutional investors. It will also improve local adoption. 

Also, the regulations will spur crypto adoption in more African countries. 

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