September 24, 2020
CRYPTOCURRENCY: REGULATION OF DIGITAL ASSETS IN NIGERIA
BY Ruth Nwankwo (Associate), Akorede Folarin (Associate)
and Ugochukwu Okekeatu (Trainee Associate)
INTRODUCTION
Cryptocurrency is no longer a new concept in the global economy. In fact, cryptocurrency adoption and activities are on the rise all over the world. Cryptocurrency has been defined simply as a digital or virtual currency that is secured by cryptograph. It has been considered to be a digital medium of exchange, based on the principles of cryptography allowing performance of secure, decentralized and distributed economic transactions. It is essentially electronic cash.
Bitcoin was the first cryptocurrency to be created and launched in 2009 and so far, more cryptocurrencies have been introduced such as Litecoin, Peercoin, Namecoin, Ethereum, Cardona, EOS, Tron etc. According to the Chainalysis 2020 Geography of Cryptocurrency Report, which is the first ever attempt at a comprehensive country-level breakdown of global cryptocurrency activity, cryptocurrency is now a global phenomenon. In fact, the following countries, with Nigeria at the 8th position, were ranked top ten (10) out of 154 countries on the 2020 Global Crypto Adoption Index; they are Ukraine, Russia, Venezuela, China, Kenya, United States of America, South Africa, Nigeria, Colombia and Vietnam. According to this report, the index is a testament to the buzz around cryptocurrency as an investment and especially in the developing world as a means of value storage and medium of exchange. The index also showed that developing countries have high grassroots cryptocurrency activity.
Prior to now, there was no existing regulation on digital assets like cryptocurrency although regulatory authorities have shown interest in the developments in this sector for a while. In 2019, the Securities and Exchange Commission (SEC) set up the Fintech Roadmap Committee of the Nigerian Capital Market to analyze the impact of fintech on investments and securities in Nigeria and to make recommendations on possible regulatory moves. One of the recommendations in the Final Report of the Committee is that the SEC should be responsible for the regulation of Virtual Financial Assets (VFAs) Exchanges in Nigeria and the regulatory framework. Consequently, SEC released a draft document to regulate digital assets but some industry players insisted that while it was a good move, it was too early to commence regulation of stakeholders in the sector, investors and dealers alike.
