SEC reacts to CBN’s ban on crypto transactions

The Securities and Exchange Commission (SEC) said it has received several comments and inquiries from the public on a perceived policy conflict between the SEC Statement on Digital Assets and their Classification and Treatment of September 11, 2020, and the Central Bank of Nigeria (CBN) Circular of February 5, 2021. “We see no such contradictions or inconsistencies”, the SEC said in a recent statement.

The SEC said it made its statement at the time, to provide regulatory certainty within the digital asset space, due to the growing volume of reported flows. Subsequently, in its capacity as the regulator of the banking system, the CBN identified certain risks, which if allowed to persist, will threaten investor protection, a key mandate of the SEC, as well as financial system stability, a key mandate of the CBN.

In recognition of the fact that digital assets may have the full characteristics of investments as defined in the Investments and Securities Act 2007, the SEC Statement asserts that trading in such assets falls under SEC’s regulatory purview, except proven otherwise. The primary objective of the Statement was not to hinder or stifle innovation but to establish standards of ethical practices that ultimately make for a fair and efficient securities market.

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In light of these facts, we have engaged with the CBN and agreed to work together to further analyse, and better understand the identified risks to ensure that appropriate and adequate mitigants are put in place, should such securities be allowed in the future.

Consequently, it has become necessary to provide the following clarifications about the implementation of SEC’s Capital Market FinTech Strategy: For the purpose of admittance into the SEC Regulatory Incubation Framework, the assessment of all persons (and products) affected by the CBN Circular of February 5, 2021, is hereby put on hold until such persons are able to operate bank accounts within the Nigerian banking system; and The planned implementation of the SEC Regulatory Incubation Guidelines for FinTech firms who intend to introduce innovative models for offering capital market products and services will continue.

The SEC will continue to monitor developments in the digital asset 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.