Nigeria’s Securities and Exchange Commission (SEC) will begin to regulate digital currencies and crypto-based companies, the Commission noted in a statement this week. I want to wish the Commission good luck. My understanding is that Nigeria is still struggling on how to collect VAT on digital companies which do business exclusively online; this new playbook may be harder. But it has to be done because Nigeria is a country. Good luck.
Similarly, all Digital Assets Token Offering (DATOs), Initial Coin Offerings (ICOs), Security Token ICOs and other Blockchain-based offers of digital assets within Nigeria or by Nigerian issuers or sponsors or foreign issuers targeting Nigerian investors, shall be subject to the regulation of the Commission. Existing digital assets offerings prior to the implementation of the Regulatory Guidelines will have three (3) months to either submit the initial assessment filing or documents for registration proper, as the case may be.
The SEC hereby categorizes the following virtual assets/instruments as follows:
|S/N||VIRTUAL DIGITAL ASSET||TREATMENT|
|1.||Crypto Asset- e.g non fiat virtual currency.
|Treated as commodities if traded on a Recognized Investment Exchange and/or issued as an investment, and is subject to Part E of SEC Rules and Regulations and any other relevant sections and subsequent Rules which will be enacted in future|
|2.||Utility Tokens or “Non-Security Tokens”
(e.g., virtual tokens. These tokens simply provide users with a product
|Treated as commodities. However, spot
trading and transactions in Utility Tokens do not fall under SEC purview
unless conducted on a Recognized Investment Exchange and therefore subject to
Part E of SEC Rules and Regulations and any other relevant sections and
subsequent Rules which will be enacted in future
|3.||Security Tokens” (e.g., virtual tokens that
have the features and characteristics of a security. Represent assets such as
participations in real physical underlyings, companies, or earnings streams,
or an entitlement to dividends or interest payments. In terms of their
economic function, the tokens are analogous to equities, bonds, etc.
|Deemed to be Securities pursuant to PART
XVIII (315) of ISA, “definition of Securities’’. All financial services
activities in relation to Security Tokens, such as operating primary /
secondary markets, dealing / trading / managing investments in or advising on
Security Tokens, will be subject to the relevant regulatory requirements.
Market intermediaries and market operators dealing or managing investments in
Security Tokens need to be registered / approved by SEC as CMOs, Recognized
Investment Exchanges or Recognized Clearing Houses, as applicable.
|4.||Derivatives and Collective Investment Funds
of Crypto Assets, Security Tokens and Utility Tokens
|Regulated as Specified Investments under the
ISA & SEC Rules and Regulations. Market intermediaries and market
operators dealing in such Derivatives and Collective Investment Funds will
need to be registered / approved by SEC.