Innovations usually come with some form of excessive hype, fads, and hyperbole.

For Nigeria’s regulatory authorities, separating the “wheat from the chaff” in digital innovations remains a challenge. This challenge has shaped the regulatory approach on cryptocurrencies in Nigeria in pursuit of financial and monetary stability. The focus of this article is to review the state of play on cryptocurrencies in Nigeria’s regulatory landscape and make recommendations on best approaches.

Nigeria’s Central Bank of Nigeria (CBN) Position on Cryptocurrencies

On 5 February 2021, a circular purportedly released by the CBN directed banks and other financial institutions that dealing in or facilitating payments for cryptocurrency payments is prohibited. In the circular, the CBN requires regulated financial institutions to identify persons and/or entities transacting in cryptocurrency or operating cryptocurrency exchanges within their systems and close such accounts immediately.

The circular effectively extends and expands the CBN’s previous directive of 12 January 2017 where the CBN similarly cautioned Deposit Money Banks (DMBs), Non Bank Financial Institutions (NBFIs), Other Financial Institutions (OFIs), and members of the public on the risks associated with cryptocurrencies transactions.

Conflicting Policies: the CBN’s  and the Securities & Exchange Commission’s (SEC) Regulatory Dissonance

Regarding the treatment of cryptocurrencies in Nigeria, it appears that there is a lack of coordination between the CBN and the SEC. While the CBN views cryptocurrencies as a threat due to the susceptibility of cryptocurrencies to fraud, the SEC recently considered cryptocurrencies such as bitcoin for example as digital assets, specifically commodities or securities. In its statement  released 14 September 2020, the SEC defined crypto assets “as 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.“

The SEC also stated its intention to regulate “any person, (individual or corporate) whose activities involve any aspect of Blockchain-related and virtual digital asset services”. According to the SEC statement, such persons would be mandated to be “registered by the Commission and as such, will be subject to the regulatory guidelines.” Though it is understandable that CBN’s regulatory jurisdiction is different from that of SEC, one would have expected that the CBN would at least acknowledge the SEC statement and then state its own approach to the monetary and currency dimensions of cryptocurrencies.  CBN’s outright ban of banking services to an entire crypto industry—only second to the United States—does not demonstrate that the CBN is on the same page with the SEC. Interestingly, both the CBN and the SEC are key stakeholders—at least according to the draft National Blockchain Adoption Strategy—a policy document introduced by the National Information Technology Development Agency (NITDA) in November 2020.

Source: @ Ndubisi Ekekwe (https://www.linkedin.com/in/ndubuisi-ekekwe-36068210?lipi=urn%3Ali%3Apage%3Ad_flagship3_profile_view_base_contact_details%3B3584b786-c6e5-4817-8e9b-4ca18d30af62)