Nigeria’s Securities and Exchange Commission (SEC) will now regulate crypto-coin and crypto-token investments among other digital assets when “the character of the investment qualifies as securities transactions”. This is part of the commission’s effort to enhance market integrity and transparency and protect public, and investor interest as digital assets now provide an alternative form of investment.
A statement from the commission says the regulations stem from its position that “virtual crypto-assets are securities unless proven otherwise” by the issuer.
Different Regulations for Different Digital Assets
The new regulation categorizes digital assets into four groups. SEC will treat crypto assets as commodities if traded on recognized investment exchanges, or if issued as investments. The rules will also treat utility tokens such as virtual tokens which provide users with a product or a service as commodities. However, spot trading and transactions of the tokens do not fall under the SEC’s jurisdiction.
The Exchanges Commission treats security tokens such as participations in real physical underlyings, companies, entitlement to dividends or interest or earning streams as securities. As a result, activities relating to security tokens such as operating primary and secondary markets, dealing and trading will follow SEC regulations.
Intermediaries and operators of the tokens will also require SEC approval, similar to those of derivatives and Collective Investment Funds of Crypto Assets, utility and security tokens.
The commission will require issuers of virtual assets that qualify as securities to register the digital assets, and therefore follow SEC regulations.
SEC requires all parties involved in reception, transmission and execution of orders, dealing, portfolio management, investor advice and custodian services of blockchain-related or virtual digital assets to register with the regulator.
An SEC statement says that the regulations will create standards that encourage ethical practices for a fair and efficient market.