Nigeria’s stock market regulator explains position on CBN’s cryptocurrency exchange ban

SEC to work with CBN to analyze the risk associated with digital currencies

The Securities and Exchange Commission (SEC) has revealed its stand on the cryptocurrency ban by the central bank explaining that the apex bank in its capacity as the regulator of the banking system identified certain risks, which if allowed to persist will threaten investor protection.

SEC said in a statement on Thursday that the CBN in its capacity as the regulator of the banking system, 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.”

SEC said for the purpose of admittance into the SEC Regulatory Incubation Framework, the assessment of all persons (and products) affected by the CBN circular “is hereby put on hold until such persons are able to operate bank accounts within the Nigerian banking system.”

It said the planned implementation of the SEC Regulatory Incubation Guidelines for fintech firms intending to introduce innovative models for offering capital market products and services would continue.

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“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,” it added.

On a perceived policy conflict between its September 11, 2020 statement on digital assets and classification and treatment and the CBN circular of February 5, 2021, SEC said they 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.”

Recall that, last Friday, the Central Bank of Nigeria ordered banks and other financial institutions in the country to close all crypto currency accounts.