What Does Nigeria’s Proposed Crypto Regulation Mean for Crypto in Africa?

What Does Nigeria’s Proposed Crypto Regulation Mean for Crypto in Africa?

Recently, the Securities and Exchange Commission of Nigeria announced that it would regulate the trading of digital currencies in Nigeria. The regulator stated in a statement that the regulation will guide sponsors and issuers of virtual assets.

This is to protect investors’ best interest and promote transparency in the space. The regulator stated that the general goal of regulation was not to inhibit technology or stifle innovations, but to establish standards that encourage ethical practices.

Regulations could bring more legitimacy to crypto in Nigeria and attract more investors

Although there is not much information about the regulation, the agency stated that it will apply “when character of investments qualifies for securities transactions.” This means that if digital assets are classified as securities, they will be subject to the Nigerian SEC’s jurisdiction.

Even though regulation is not yet in place, the Nigerian SEC’s efforts to regulate cryptocurrencies suggests a shift in Nigeria’s attitudes toward them. The Central Bank of Nigeria declared in 2018 that crypto-currencies such as Bitcoin, Ripple and Monero, Litecoins, Dogecoins, Onecoin and Monero were not money.

Legally classifying cryptocurrency as a security will not turn it into money. The fact that the Nigerian SEC recognizes that cryptocurrencies are securities (and as such, need to be regulated), is a positive step.

Because more regulations have been placed on the cryptocurrency industry in countries other than the United States, more investors, especially those of institutional stripe have followed. Investors may feel more secure entering the crypto space if regulators are available to reduce the risk of fraud and other mishaps.

The space can be stabilized by cryptocurrency regulations. Ayodeji , managing director of Afrinvest securities, Lagos, stated that “crypto transactions already occur and the sooner it is regulated the less havoc it causes on the economy.” He also said that the emergence and regulation of crypto assets “is another way to offer alternative assets to investors.”

Nigeria is a crypto hotspot

It seems that Nigerian investors have been diving into the worlds of cryptocurrency even without regulations.

Fernando Martinho (chief executive at fintech crowdfunding platform, Nimbus Platform) told Finance Magnates, “Nigeria’s a crypto-hotspot.”

He said that “it is Africa’s largest crypto market, particularly in terms of consumer adoption.”

Martinho explained to Finance Magnates that this is evident by several metrics. “According to Google Trends Nigeria ranks first globally in Google searches for terms such as ‘Bitcoin,’ and ‘Ethereum”.

Martinho stated that the country was also one of Africa’s largest sources of BTC trading volume.

He cited Chainalaysis’s recent report that indicated that “Nigeria and South Africa lead the continent in crypto transfers per month.”

Martinho stated that the Nigerian SEC is driven by the high interest in cryptocurrency: “So big an interest from the residents of Nigeria push regulators towards appropriate legislation.”

More regulations tend to bring in more institutional investors

Although retail investors seem to drive most interest in cryptocurrency in Nigeria, Martinho stated that institutional adoption would likely occur once more regulations are in place.

Similar phenomena have been observed in countries with higher regulation of the cryptocurrency industry.

Indeed, Ciara sun, global markets head at Huobi Group stated at a CoinTelegraph conference in July that larger institutions have more stringent compliance requirements. However, regulatory agencies have not been able to provide enough guidance in the past on digital assets.

She stated that “this unclear regulatory landscape has made the riskier for larger institutions.”

Even if institutional investors are not immediately available to the Nigerian crypto industry, there is still a lot of potential for its growth.