Nigeria SEC introduces digital asset regulations

The guidelines come amid a crackdown on the sector by the Central Bank of Nigeria (CBN), which has prohibited banks from servicing Bitcoin-related accounts. Titled ‘Rules on Issuance Offering and Custody of Digital Assets’, the set of guidelines covered everything from the issuance of digital assets as securities to the regulations governing virtual assets service providers (VASPs). 

Those seeking to issue ICOs that target Nigerian investors must present a draft of their whitepaper to the Securities and Exchange Commission (SEC) beforehand. It shall then assess the project, including whether the said tokens qualify as securities.

If approved, the issuer will only be allowed to raise 20 times his shareholders’ funds with a ceiling of 10 billion nairas (USD 24.2 million). The amount collected must be demonstrably sufficient to undertake the project as outlined in the white paper. If unable to hit the soft cap, the issuer shall refund all the investors within five days. Nigerians can only invest a maximum of USD 484 in one ICO unless they are institutional investors.

The SEC also issued guidelines for digital asset offering platforms as well as digital asset custodians, with both being subjected to the highest level of scrutiny and being required to meet global standards in operations and security before being licensed to serve Nigerians. 

Key generation and management, conflict of interest, segregation of clients’ assets, outsourcing, audits, custody of the assets, and more were all discussed in the 54-page document. VASPs will be required to obtain a license before serving Nigerians, and to get one, they will have to fulfil a very long list of requirements by the SEC, ranging from their corporate structure and security of the platform to risk management and compliance.

Exchanges will be scrutinised even more stringently. For starters, they will be required to pay upwards of 30 million nairas (USD 73,000) in registration and processing fees and have a minimum capital of USD 1.2 million. They will also have to prove that they have mechanisms in place to deal with conflict of interest, transparency, asset protection, risk management, and more.

The Nigerian digital currency community is welcoming of the regulations, which according to one of the country’s largest exchanges, could bring the much-needed clarity that the industry has been seeking.