Because of government restrictions, much of the Nigerian crypto market is underground or peer-to-peer, and the country’s securities regulator is looking into ways to make investors safer.
In 2021, financial institutions in Nigeria have been subjected to a government crackdown on cryptocurrencies, beginning with the central bank’s notorious ban on lenders who provide services to crypto exchanges in February. With much of the Nigerian crypto market forced to be peer-to-peer, Nigeria’s Securities and Exchange Commission (SEC) is now aiming to introduce regulations that could regularize the industry and provide investors with better protection.
According to a September 2 report, the SEC has created a dedicated fintech division tasked with researching crypto and blockchain investments and products, which it will then use to develop a future crypto regulatory framework. This week, Director-General Lamido Yuguda as saying that the agency is “looking at this market closely to see how we can bring out regulations that will help investors protect their investment in blockchain.”
The Nigerian Securities and Exchange Commission (SEC), which states that all crypto assets “are securities, unless proven otherwise,” will be able to establish a regulatory framework only if crypto is reintegrated into the country’s banking system. The agency is also reportedly looking to collaborate with fintech firms to strengthen the domestic securities market in order to discourage capital flight, which continues to plague multiple sectors.
The exclusion of cryptocurrency from banking channels has not dampened investor interest in the asset class. On the contrary, despite a year marred by political and economic crises, such as social and economic repression and rampant inflation, crypto adoption has increased.
In addition, the Central Bank of Nigeria (CBN) is collaborating with a Barbados-based fintech firm as a technical partner for its proposed e-naira digital currency, for which preliminary guidelines were issued in August. CBN Governor Godwin Emefiele expressed confidence that cryptocurrencies such as Bitcoin (BTC) will eventually be legal in the country at a meeting of the country’s Monetary Policy Committee in Abuja this spring, but stressed that the government would do everything possible to prevent them from being used to finance illicit activities.