SEC proposes rules regulating Blockchain and Crypto investments

The Securities and Exchange Commission (SEC) in Nigeria has issued regulatory guidelines for digital currencies and crypto-based companies or startups to protect investors and create standards for ethical practices. 

In a statement signed Friday, the Securities and Exchange Commission (SEC) of Africa's most populous country said all crypto assets will fall under the regulation that covers securities exchanges and transactions on exchanges.

It added that the burden of proof will be on issuers themselves to show the regulator, in an initial assessment filing, how their particular digital asset doesn't count as a security.

"The position of the Commission is that virtual crypto assets are securities unless proven otherwise," the SEC said.

The SEC confirmed all forms of digital asset offering taking place in the country, as well as participating individuals and companies, acting for themselves or on behalf of others, will be subject to its regulatory guidelines and approval. As well as clarifying in no uncertain terms whose jurisdiction cryptocurrencies fall into, the move might also cover all bases and ensure even offerings that don't meet the criteria as a securities sale still register and file with the SEC.

It may also be an attempt to better control overseas offerings. Issuers that are based in countries without reciprocal investment agreements with Nigeria, such as the U.S., could be compelled to set up a local branch in the country.

Nigeria isn't the first African nation aligning digital asset offerings with existing securities guidance. South Africa published a policy paper in April that called for all token offerings to adhere to traditional regulation as much as possible.

WHO WILL BE REGULATED?

1. Any person, (individual or corporate) whose activities involve any aspect of Blockchain-related and virtual digital asset services, must be registered by the Commission and as such, will be subject to the regulatory guidelines. Such services include, but are not limited to reception, transmission and execution of orders on behalf of other persons, dealers on own account, portfolio management, investment advice, custodian or nominee services.

2. Issuers or sponsors (start-ups or existing corporations) of virtual digital assets shall be guided by the Commission’s regulation. The Commission may require Foreign or non-residential issuers or sponsors to establish a branch office within Nigeria. However foreign issuers or sponsors will be recognized by the Commission where a reciprocal agreement exists between Nigeria and the country of the foreign issuer or sponsor.

3. A recognition status will also be accorded, where the country of the foreign issuer or sponsor is a member of the International Organization of Securities Commissions (IOSCO).

For these purposes, the Commission has adopted the following with respect to virtual crypto assets:

“Crypto Asset” means a digital representation of value that can be digitally traded and functions as (1) a medium of exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not have legal tender status in any jurisdiction. A Crypto Asset is – neither issued nor guaranteed by any jurisdiction, and fulfils the above functions only by agreement within the community of users of the Crypto Asset; and Distinguished from Fiat Currency and E-money.”