Nigerian Securities and Exchange Commission Considers Token Issuance on Licensed Digital Exchanges

05/01/2023 07:31 • Blockchain Briefs • 142 views

According to reports, Abdulkadir Abbas, head of securities and investment services at the Nigerian Securities and Exchange Commission (SEC), stated that the Nigerian SEC is considering allowing token issuance on licensed digital exchanges, which are supported by assets including equity, debt, property, but not cryptocurrency. The Nigerian SEC aims to register fintech companies as digital sub brokers, crowdfunding intermediaries, robot advisors, fund managers, and token issuers. It will not register cryptocurrency exchanges until an agreement is reached with the central bank on standards. Abbas stated that interested digital exchanges will undergo a one-year regulatory incubation period, during which they will only provide skeleton services supervised by the SEC to study their operational model and suitability for providing services in the country. Meanwhile, Abbas stated that by the 10th month of the incubation period, it will be possible to decide whether to register the company, extend its incubation period, or require the company to cease operations.

Nigerian SEC plans to allow licensed digital exchanges to issue tokens, with a regulatory incubation period of one year

The Nigerian Securities and Exchange Commission (SEC) is exploring the possibility of allowing token issuance on licensed digital exchanges. The move is in line with the Commission’s efforts to develop regulations that spur growth in the country’s fintech industry. According to Abdulkadir Abbas, head of securities and investment services at the Nigerian SEC, the new regulation will support digital sub-brokers, crowdfunding intermediaries, robot advisors, fund managers, and token issuers. However, crypto exchanges will have to wait for approval from the Central Bank of Nigeria before they can be registered.

The Need for Digital Exchange Regulations

Over the years, the Nigerian fintech industry has experienced tremendous growth, thanks to the adoption of blockchain technology and cryptocurrencies. However, the sector’s growth has not been without challenges. One major challenge is the lack of regulatory oversight of digital exchanges. This gap in regulatory oversight has led to concerns about money laundering, fraud, and other illegal activities.
Recognizing the need to address these concerns, the Nigerian SEC has begun developing regulations that will enable the growth of the country’s fintech industry while ensuring the safety and security of investors. The new regulations will require all digital exchanges that offer token issuance to be licensed by the Nigerian SEC. This move is expected to bring more trust and legitimacy to the sector.

The Licensing Process

Under the proposed regulatory framework, interested digital exchanges will undergo a one-year regulatory incubation period. During this period, they will only be allowed to provide skeleton services supervised by the SEC. This will enable the Commission to study the operational model and suitability of the digital exchange for providing services in the country.
After ten months of the incubation period, the SEC will review the digital exchange’s progress. If everything looks good, it will then be possible to decide whether to register the company, extend its incubation period, or require the company to stop operations.

Token Issuance on Licensed Digital Exchanges

Token issuance on licensed digital exchanges will be supported by assets including equity, debt, and property. However, the issuance of cryptocurrency-based tokens will not be allowed until an agreement is reached with the Central Bank of Nigeria on standards.
The regulations are designed to create a conducive environment for digital exchange services to thrive while also providing adequate protection for investors. The move is expected to bring more confidence to the sector and attract more investments.

Conclusion

The decision by the Nigerian SEC to consider allowing token issuance on licensed digital exchanges is a step in the right direction. The move is expected to encourage the growth of the country’s fintech industry while mitigating the risks associated with digital exchanges. It also highlights the Commission’s commitment to creating a safe and secure regulatory environment for investors and operators in the Nigerian fintech sector.

FAQs

Q: What is the Nigerian Securities and Exchange Commission?
A: The Nigerian Securities and Exchange Commission is a government agency responsible for regulating and overseeing Nigeria’s securities market.
Q: What is a digital exchange?
A: A digital exchange is a platform that facilitates the buying and selling of digital assets such as cryptocurrencies, tokens, and digital securities.
Q: What is token issuance?
A: Token issuance refers to the creation and distribution of digital tokens that represent an asset or utility on a blockchain network.

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