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SEC Puts on Hold the Assessment of Persons Affected by CBN Directive on Cryptos

BlockChain & Cryptos	1054 VIEWS
BlockChain & Cryptos
1054 VIEWS

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Friday, February 12, 2021 / 09:10 AM / by SEC Nigeria / Header Image Credit: Adobe

The Securities and Exchange Commission (SEC) has received several comments and inquiries from the public on a perceived policy conflict between the SEC Statement on Digital Assets and their Classification and Treatment of September 11, 2020 and the Central Bank of Nigeria (CBN) Circular of February 5, 2021. 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.

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.

Consequently, it has become necessary to provide the following clarifications about the implementation of SEC's Capital Market FinTech Strategy:

For the purpose of admittance into the SEC Regulatory Incubation Framework, the assessment of all persons (and products) affected by the CBN Circular of February 5, 2021 is hereby put on hold until such persons are able to operate bank accounts within the Nigerian banking system.
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 will 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.

Related Links and Post on the CBN Action

1. CBN Responds to Reactions on Regulatory Directive on Cryptocurrencies - Feb 07, 2021

2. Central Banking and the Cryptocurrency Challenge - Call it like it is - by Tope Fasua, Feb 07, 2021

3. CBN Tightens Noose on Cryptocurrency Market - Proshare, Feb 05, 2021

4. A Thread Explaining What the CBN Circular Means and Why the CBN issued It - Stears Business, Feb 05, 2021

5. CBN Circular on CRYPTOCURRENCY: CBN and SEC Singing Discordant Tunes - By Stephen Azubuike, Stephen Legal, Feb 05, 2021

6. The Unsettling Dust over Cryptocurrency Transactions - by James Emejo, ThisDay, Feb 07, 2021

7. Revealed: How a Criminal Cartel Hijacked Bank Data, Demanded Ransom in Bitcoins - by Sanya Adejokun, Tribune, Feb 07, 2021

8. Feb 05, 2021

9. More than 1,000 cryptocurrencies have already failed - here's what will affect successes in future - by Gavin Brown and Richard Whittle, The Conversation, Nov 21, 2019

10. Banning Cryptocurrency will Give Power to Outlaws - Emeka Okoye, Leadership, 3 years ago

11. VIDEO: 2017 CIBN forum discussing blockchain technology in Nigeria - WebTV, 2017

12. Banking and Bitcoin - Can Crypto Kill the Banks? - by Ivan on Tech, Sep 19, 2020

13. Can Bitcoin Kill Central Banks? - by James MCWHINNEY, Investopedia, Jun 25, 2019

14. Central Bank Digital Currency and its impact on the banking system: A need for a new payment system - by Zeb, Innovation & Digital, BankingHub, Aug 22, 2018

15. Why Central Bank Digital Currencies will Destroy Bitcoin - by Nouriel Roubini, The Guardian, Nov 19, 2018

16. (PDF) Fedcoin: A Central Bank-issued Cryptocurrency - by JP Konig, Nov 15, 2016

Related Video

The first video is an excerpt from the 2017 CIBN forum discussing blockchain technology in Nigeria. Mr. Musa Jimoh (the then Deputy Director, Payments CBN) was giving the position of the banking regulator on digital currency. CBN's position has since evolved as changes occurred in adoption, infrastructure, risks & global regulation.