Business & Economy - News - February 12, 2021

Alleged regulatory conflict: CBN policy on cryptocurrency in line with its mandate, says SEC

Suspends the assessment of all digital assets, cryptocurrency products till further notice

The Central Bank of Nigeria (CBN) policy restricting trading on cryptocurrency and trading in other digital assets in Nigeria does not conflict with that of the Securities and Exchange Commission (SEC), the capital market regulator clarified on Thursday.
SEC said in a statement that there were neither contradictions nor inconsistencies between its statement last year on Digital Assets and their Classification and Treatment and the CBN’s recent circular restricting trading on cryptocurrency in Nigeria.
The perceived policy conflict between the two regulatory authorities, SEC said, was unfounded, as both were acting in line with their respective regulatory mandates in the country’s investment, banking and financial systems.
On September 11, 2020, SEC had issued a statement recognizing digital assets as possessing full characteristics of investments defined in the Investments and Securities Act 2007 on whose trading falls under the purview of its regulatory authority.
The primary objective of the statement, SEC clarified, was not an attempt to hinder or stifle innovation, but to establish standards of ethical practices that ultimately make for a fair and efficient securities market in the country.
SEC said its statement at the time was to provide regulatory certainty within the digital asset space, due to the growing volume of reported flows from transactions on digital assets in the country’s economy.
However, the CBN circular on February 5, 2021 to Deposit Money Banks (DMBs) to warn Nigerians to desist from transacting in/and dealing in cryptocurrencies within the country has continued to stir controversies as some Nigerians alleged it conflicted with SEC’s policy pronouncement over the status of digital assets in the country.
In the circular, which reiterated its February 28, 2018 warning to banks and other financial institutions against virtual currency operations in the country, the CBN reaffirmed its opposition to trading in cryptocurrency and other digital assets in Nigeria.
The apex bank warned Nigerian banks and Nigerians against trading in cryptocurrencies such as Bitcoin, Ripples, Monero, Litecoin, Dogecoin, Onecoin, etc and other exchanges as NairaEx within the country, because they were not licensed or regulated by the CBN.
In justifying its policy decision, the CBN said dealers and investors in all kinds of cryptocurrencies in Nigeria were not protected by law, warning that investors and consumers risk losing money without any legal redress in the event of collapse or closure of the business.
SEC in its statement on Thursday acknowledged both institutions were acting in line with their respective regulatory mandates to identify risks, which if allowed to persist, would threaten investor protection and financial system stability.
Consequently, SEC said both regulatory authorities have since engaged with each other and resolved to work together to further analyze the situation, with a view to having a better understanding of the identified risks.
The significance of the engagement, SEC said, was to ensure that appropriate and adequate steps were put in place to mitigate anticipated risks associated with the trading in those securities should they be allowed to operate in the country in the future.
On the implementation of the Capital Market FinTech Strategy, SEC said to be accepted in its regulatory incubation framework, the assessment of all persons (and digital assets/products) affected by the CBN circular have been put on hold until operators are able to operate bank accounts within the Nigerian banking system.
Regardless, SEC said its planned implementation of the Regulatory Incubation Guidelines for FinTech firms who intend to introduce innovative models for offering capital market products and services would continue.
However, SEC said it would continue to monitor closely developments in the digital assets 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.

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