The State of Cryptocurrency Regulation in Nigeria

The cryptocurrency landscape has grown since the launch of Bitcoin in 2009.Governments across the world continually strive to formulate rules policies and regulations to mitigate fraudulent activities . Blockchain technology underpins many different cryptocurrencies. But, it's also being used for many other things that require transactions to be fast and secure, but also decentralized. While fostering blockchain and digital asset innovation for instance Africa’s  most populous country Nigeria has been active in defining its cryptocurrency regulation for the country’s tech savvy and pro blockchain youth population who is eager to adopt digital assets. 

In this article, we will discuss the state of cryptocurrency regulation in Nigeria. Before that, Let’s look into the overall crypto market in Nigeria to understand the potential and need for regulatory bodies.

Cryptocurrency adoption and growth in Nigeria

Nigeria's growing interest in cryptocurrencies was noticeable but it jumped to the forefront during the crypto market crash in April 2022 when a Google Trends data analysis by Coin Gecko indicated Nigeria to be one of the most crypto-curious nations in the search history of various nations was analyzed and the results emphasized the popularity of cryptocurrencies in Nigeria even amid crypto dip another report by chainalysis put Nigeria among the top countries showing a high global crypto adoption index, especially in peer to peer P2P trading ku coin and Paxful are among the leading cryptocurrency exchanges in Nigeria for P2P trading and investing.

Is cryptocurrency legal in Nigeria?

Cryptocurrencies were not recognized by the Central Bank of Nigeria as legal tender in February 2021. The CBN banned commercial banks in Nigeria from engaging in any cryptocurrency transactions. The CBN in a bid to protect citizens from black market criminal and fraudulent crypto activities made it clear that the financial system and banking sector of Nigeria would not be linked to cryptocurrency trading. However, the bank has also acknowledged that cryptocurrencies have the potential to improve financial inclusion and transparency in the country in the foreseeable future. Nevertheless crypto is not illegal in Nigeria. However, there are no crypto laws in Nigeria and no legislation legal act, or provisions criminalizing the use of cryptocurrencies on the contrary cryptocurrencies are widely traded on cryptocurrency exchanges across Nigeria they are simply not a part of the banking sector of the country.

Is cryptocurrency regulated in Nigeria?

Followed by the CBN ban and amid the growing popularity of cryptocurrencies in the country the Securities and Exchange Commission took on the task of framing crypto regulation in Nigeria in May 2022 and published a comprehensive 54-page document titled New Rules on Issuance Offering Platforms and Custody of digital assets on its website.

This document published by the SEC opens doors for cryptocurrency service providers in Nigeria and details a guideline for banking and financial institutions of the country on how they may interact with digital assets the document also clarifies and defines digital assets in Nigeria and iterates that all digital asset token offerings initial coin offerings and any other blockchain-based offerings within Nigeria or by Nigerian issuers or foreign issuers engaging Nigerian citizens will be regulated by the Nigerian SEC.

Crypto asset rules in Nigeria for crypto exchanges:

Crypto asset rules in Nigeria for crypto exchanges under the Nigerian SEC’s new rules all crypto exchanges providing services in Nigeria are required to secure a permit which gives the SEC access to their records.The digital asset rules are sometimes also commonly referred to as crypto asset rules in Nigeria a digital asset exchange is an electronic platform that facilitates the trading of a virtual asset or digital asset.

Crypto Regulations in India:

Currently, cryptocurrencies are not regulated in India, and the nation’s government has stated that cryptocurrencies are not legal tender and advised their citizens against transacting with these currencies. After cryptocurrencies began surging in India and the government was looking at potential revenue loss, the government formed a committee to report on the use of virtual currency in the country.  The committee’s report suggested that it be cemented as a policy that no Indian citizen should own any form of cryptocurrency privately. Currently, the government is planning to present another bill in the name of Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. In fact, the holders will be free to sell their bitcoins within six months without being constrained. Further, countries have only banned mining and trading of the cryptocurrency while India goes to the extent of banning possession of it would be the first large economy to do so. The Reserve Bank of India is also envisaging a state-backed cryptocurrency for India.

Crypto Regulations in USA:

It can be observed that the attitude of the United States government towards cryptocurrency has maintained a policy of restraint, but the regulation of the cryptocurrency market and cryptocurrency activities has been and continues to be quite strict and selective. Instead, cryptocurrencies are highly restricted not directly the currencies themselves but the platforms which enable the transactions to take place. This is due to concerns with innovation as well as consumers and financial stability became an important goal in the countries of the world.

Here's a deeper look at how different agencies are involved:Here's a deeper look at how different agencies are involved:

Securities and Exchange Commission (SEC): The SEC sees some tokens as securities because they are investments in a project, but other coins are not. It is important for the SEC to ensure that fraudulent practices are not conducted in the market and the companies make their financial details available to the public. Such can encompass legal proceedings against companies for selling unregistered securities or assessment of compliance in Initial Coin Offerings (ICOs).

Commodity Futures Trading Commission (CFTC): Owned by the CFTC, some cryptocurrencies are classified as commodities like the physical bullion or oil. About them, they govern the futurist contracts based on such digital currencies to avoid sharp practices that rise from manipulation of the market.

Financial Crimes Enforcement Network (FinCEN): FinCEN tasks are to examine and investigate cases of money laundering and fight against financial crime. They are for example, forcing cryptocurrency exchanges to register as Money Services Businesses (MSBs) and applying respective Anti Money Laundering/Know Your Customer (AML/KYC) measures to discourage unlawful activities like money laundering or financing of terrorism.

This focus on platforms aims to achieve several goals:This focus on platforms aims to achieve several goals:

Consumer Protection: Highly specifically, through controlling accesses by regulating exchanges, the government aims at curbing cons, frauds, insider trading within the cryptocurrency market.

Financial Stability: In the same respect, segregating the large transaction sizes and ensuring adherence to AML/KYC measures minimizes threats to the legacy financial structures.

Innovation: Despite that, it is important to note that the US does not want to clump down the developments of the crypto space through numerous regulations. Regulating them enables the projection of the technology used (blockchain) to grow while exercising caution on the impacts created by the same platforms.

Conclusion:

In summary the current state of Nigerian citizens and their perception towards cryptocurrencies and related assets is an upward trend of interest despite overwhelming policies and laws that are not clearly defined. Presently, Nigeria is moving towards regulating cryptocurrencies, although this step to regulate the use of digital assets will help the country to embrace technological advancement in order to promote financial inclusion and prevent vices associated with use of such financial products.

FAQs

1.For a start, it’s important to understand whether or not the trading of cryptos is legal in Nigeria?

It is worth mentioning that although cryptocurrency is not deemed as illegal in Nigeria, the Central Bank of Nigeria has issued a statement against using, holding, or transacting in virtual currencies, and at the same time there are no direct legal provisions that declare its usage unlawful for individuals.

2. What are the regulatory bodies for cryptocurrency in Nigeria?

No specific regulation in Nigeria has declared cryptocurrency trading illegal or criminalized it. The Central Bank of Nigeria (CBN), Nigeria’s financial market regulator, does not recognize cryptocurrencies and hence does not have a regulatory framework or licensing regime in place for cryptocurrency operators.

3. It is safe to trade crypto in Nigeria since there is no concrete law banning the use or trade of cryptocurrency in the country?

Forex trading is not specifically regulated in Nigerian law. Forex trading is neither legal nor illegal in Nigeria. Forex trading in Nigeria regulated by the Securities and Exchange Commission (SEC) of Nigeria under the Investment and Securities Act 2007. The SEC is responsible for monitoring the Forex market and licensing Forex brokers.

4. What effects does this understanding have in the formulation of the potential challenges associated with crypt regulation in Nigeria?

The rationale is that overly conservative rules may pose a threat to the emerging new market and slow down the development of the crypto industry. As seen above, this is a balancing process between guarding the consumer interests and the development of a vibrant crypto space.

5. In other words, source of information on the regulations of crypto in Nigeria?

Some of the main sources of information registered in Nigeria includes the official websites of Central Bank of Nigeria (CBN) and Securities and Exchange Commission (SEC) where the up to date regulatory requirements are posted. Furthermore, the observers with a good understanding of the cryptocurrency market can be trusted as well as independent publications which can offer readers their vision of the situation and strategies that work.