SEC Gives Reasons for Crypto Assets Regulation

Obiajulu Joel Nwolu

The Securities and Exchange Commission, SEC, has defended its decision to regulate crypto assets saying it was informed by the growing volume of reported flows within the digital asset space.

The chief regulator of the country’s capital market, had in September, 2020 designated digital assets, including crypto assets, as securities, noting it would regulate them.

It was followed by the order of the Centra Bank of Nigeria, CBN, to banks and other financial institutions in the country last Friday to shut down all cryptocurrency accounts.

SEC in a communique issued on Thursday said it had received several comments and inquiries from the public on a perceived policy conflict between its September 11, 2020 statement on digital assets and classification and treatment and the CBN circular of February 5, 2021.

It said, “We see no such contradictions or inconsistencies. 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.

“The SEC made its statement at the time to provide regulatory certainty within the digital asset space, due to the growing volume of reported flows.”

It further stated, “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 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.”

SEC added that for the purpose of admittance into the SEC Regulatory Incubation Framework, the assessment of all persons (and products) affected by the CBN circular is hereby put on hold until such persons are able to operate bank accounts within the Nigerian banking system.

This post was written by Obiajulu Joel Nwolu.

The views expressed here belong to the author and do not necessarily reflect our views and opinions.

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