Nigeria’s Securities and Exchange Commission (SEC) has announced new guidelines for Digital Assets as a component of its drive to supervise digital/virtual assets such as NFTs and Bitcoins. This is another landmark in the history of Africa.
This is stated in a newly published document titled “New Rules on Offering Platforms, Issuance, and Custody of Digital Assets,” which effectively legalizes cryptocurrencies in Nigeria.
The guidelines are applicable to any platforms that:
- Support virtual asset trade, exchange, and transfer
- Foreign and non-residential issuers and sponsors can issue and sponsor virtual/digital assets
- Any company that actively seeks for Nigerian investment
To begin, companies wishing to offer any type of cryptocurrency product or service in Nigeria or to Nigerians must now get a virtual asset service provider (VASP) license.
This will be in addition to applicable category licenses, which have been recognized as follows:
Exchange of Digital Assets (DAX)
For example, in addition to the VASP authorization, a digital asset exchange license would be required, granting the commission access to the exchange’s records.
It’s also worth noting that an exchange can’t assist the trade of any digital asset unless the Securities and Exchange Commission (SEC) has first issued a ‘no objection’ letter about the asset.
Platforms for Selling Digital Assets (DAOPs)
A digital assets providing platform (DAOP) is defined by the SEC regulatory framework as a portal where issuers can make an initial digital asset offering, such as an ICO.
Apart from the criteria that such services must follow, projects will now be monitored for the use of funds to verify that they are used for the reasons specified in their whitepapers.
Custodians of Digital Assets (DACs)
The Securities and Exchange Commission defines a DAC as a person who offers safeguarding, storage, holding, or custody of digital assets and tokens for the account of another person.
The rules stipulate that:
A DAC must keep up-to-date transactional records regarding to its clients’ virtual assets/digital tokens at all times, including:
- Timestamp of the transaction
- Any transaction’s details, including the transfer’s purpose, amount, and counterparty information
- Signatories and proof of transaction approval or rejection
- Balances in accounts
- Any more details about the transaction amount
According to the laws, a DAOP could offer its own custody services as long as it follows all applicable regulations.
Crypto exchanges in Nigeria are still prohibited from interacting with financial institutions, according to a circular issued by the Central Bank of Nigeria (CBN) in February 2021.
The new SEC guidelines, on the other hand, mandate that token issuance platforms and exchanges keep trust accounts with receiving banks.
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