SEC, CBN to work on digital assets regulation

Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) has reached an understanding with the Central Bank of Nigeria (CBN) to develop an appropriate regulatory framework for digital assets in line with the mandates of the two institutions.

Securities and Exchange Commission (SEC)The agreement comes on the heels of the recent controversies around the CBN’s ban on cryptocurrency bank accounts.

SEC stated that while the Commission has a key mandate of investor protection the apex bank also has a core mandate of maintaining financial system stability, two common mandates that require collaborative efforts by the institutions.

“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 stated.

The Commission stated that there were no inconsistencies in its policy stand and CBN’s recent ban on cryptocurrency bank accounts, noting that the statements by the two institutions were complementary and relevant at the time of issuance.

SEC had received several comments and inquiries from the public on a perceived policy conflict between the SEC’s statement on digital assets and their classification and treatment of September 11, 2020 and the CBN’s circular of February 5, 2021.

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“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 SEC Statement asserts that trading in such assets falls under SEC’s regulatory purview, except proven otherwise. The primary objective of the Statement was not to hinder or stifle innovation, but to establish standards of ethical practices that ultimately make for a fair and efficient securities market.

“The SEC made its statement at the time to provide regulatory certainty within the digital asset space, due to the growing volume of reported flows. Subsequently, 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,” SEC stated.

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Providing clarification on the implementation of its Capital Market FinTech Strategy, SEC stated that for the purpose of admittance into the SEC Regulatory Incubation Framework, the assessment of  persons and products affected by the CBN circular of February 5, 2021 had been put on hold until such persons were able to operate bank accounts within the nation’s banking system.

The Commission, however, added that 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 would continue.

“The SEC will continue to monitor developments in the digital asset space and further engage all critical stakeholders with a view to creating a regulatory structure that enhances economic development while promoting a safe, innovative and transparent capital market,” Sec stated.

Nation