The Nigerian SEC (Securities and Exchange Commission) is currently thinking about authorizing tokenized coin offerings secured by equities, liabilities, or tangible assets instead of cryptocurrencies on approved digital asset exchanges.
Abdulkadir Abbas, the head of securities and investment services at the Abuja-based commission, declared in an interview in Lagos that registration of digital asset exchanges on the part of SEC would be held off until they could come to a satisfactory agreement with Nigeria’s central bank. Unfortunately, the central bank has currently put a stop to all interactions between local financial entities and crypto service providers.
The Nigerian Crypto Market
Nigeria is home to a booming digital market and more than 200 million inhabitants, with nearly half the population under the age of 14. Long neglected, local assets such as equities look set to receive new attention as governments move towards legitimacy. In fact, data indicates that Nigeria records the highest volume of cryptocurrency transactions among non-U.S. countries via peer-to-peer trading platforms such as Paxful, which closed its services in April this year.
Numerous nations have recently conducted trials on comparable digital tokens. For instance, in 2022, Singapore unveiled the “Project Guardian” to probe potential applications of asset tokenization. Spearheaded by Marketnode Pte, DBS Bank along with JPMorgan, this project mainly revolved around establishing a controlled liquidity pool containing tokenized bonds and deposits.
The Stance of SEC
The SEC of Nigeria intends to authorize fintech firms that function as digital sub-brokers, intermediaries for crowdfunding, robo-advisors, administrators of funds, and issuers of tokenized coins. However, in 2021 the Central Bank gave instructions for commercial banks to prohibit crypto exchanges from operating until certain uniform standards were agreed upon. As such, registration for crypto exchanges is currently on hold.
The SEC will be keeping a watchful eye during an incubation period of one year during which a digital exchange is only allowed to provide basic services. Abbas noted that going into the tenth month, it should become clear if registration for the firm can be finalized, whether its incubation period should be extended or even if its activities must cease.