On Monday, a renowned media handle reported that the Nigerian Securities and Exchange Commission (SEC) is working on applications for digital exchanges on a trial basis. With this, they are aiming to widen market participation in Nigeria.
Sources reveal that the Nigerian securities regulator is considering allowing tokenized coin offerings backed by equity, debt, or property but “not crypto,” on licensed digital asset exchanges. Abdulkadir Abbas, head of securities and investment services at the SEC told the media:
We always like to start, as a regulator, with a very simple clear proposal before we go into the complex ones.
The regulator is also processing applications for digital exchanges on a trial basis intending them to undergo one year of “regulatory incubation” with limited services offered and under SEC monitoring to determine the firms’ fitness to provide services.
According to the report, the SEC will only register fintech firms as digital sub-brokers, crowd-funding intermediaries, robo-advisors, fund managers, and tokenized coin issuers.
It explicitly stated that it will not start registering digital asset exchanges until it reaches an agreement with the nation’s central bank.
However, the Nigerian central bank hasn’t been much warm to crypto as in 2021, the bank blocked local financial institutions from interacting with crypto services providers. Before that, Nigeria was one of the fastest crypto adopters in the region.
Furthermore, as per the report, the applications for digital exchanges subject them to undergo one year of “regulatory incubation” with limited services offered and under SEC monitoring to determine the firms’ fitness to provide services. Further, the regulator said:
By the 10th month, we should be able to determine whether to register the firm, extend the incubation period or even ask the firm to stop operation.
In the case of Nigeria whose economy has been struggling with several conditions like inflation, currency devaluation, etc. this move is expected to invite attention to local assets. Sources feel that this would help attract a tech-savvy population to local assets including equities, which have been shunned for years.
According to reports from a digital assets entity, Nigeria accounts for the largest volume of cryptocurrency transactions done on peer-to-peer trading platforms outside the US.
However, Nigeria is not the only country to test tokenized assets. In 2022, the Monetary Authority of Singapore (MAS) entered into a collaboration with JP Morgan to lead a project to investigate potential uses of asset tokenization. The initiative named “Project Guardian” involves the creation of an authorized liquidity pool comprising tokenized bonds and deposits.