What does the SEC regulate? • Techpoint Africa


I heard about the new “Statement on Digital Assets, Their Classification and Treatment” released by the Nigerian Securities Commission (SEC) yesterday from a friend who wanted to understand what the “Statement” means for his company in the Nigerian cryptocurrency space.

At first glance, the statement gives us a glimpse of the SEC’s approach to regulating the rapidly expanding cryptocurrency space. While the statement clearly establishes the intending to introduce regulation in the near future, there are other issues to be clarified.

This article is my attempt to reflect on the statement and what it might mean for the future of the Nigerian cryptocurrency regulatory framework.

First, we need regulation

We have now passed the point where we ask if Nigeria’s cryptocurrency space needs regulation; the question at this point is how to do it. The need to protect consumers and unsophisticated investors in emerging industries is a key factor in creating framework regulations.

As with any emerging industry, especially in finance, the foreseeable emergence of scams and fraudulent behavior requires clear regulation to protect investors and ensure safety within markets.

From a stakeholder perspective, investors need clarity on the existing legal frameworks before they inject their money. We are already seeing the exit of Nigerian crypto firms to more structured jurisdictions due to the lack of existing frameworks. So surely the SEC statement sends a good signal.

The statement, however, highlights some of the issues regulators around the world face in regulating cryptoassets.

The classification problem: is it a bird or an airplane?

Cryptoassets present a unique problem for regulators because they exist as hybrids between assets, currencies, securities, and commodities. For context, the US Treasury classifies bitcoin as a decentralized virtual currency, while its Commodity Futures Trading Commission and the Internal Revenue Service classifies it as a commodity and an asset, respectively. In these cases, regulators seek to classify cryptoassets in such a way that they fit into their regulatory jurisdictions.

The classification of crypto-assets also differs from country to country. The South African Revenue Service classifies bitcoin as an intangible asset. The German Federal Bank recommends using the term “crypto token”. The People’s Bank of China has stated that bitcoin “is fundamentally not a currency but an investment target.” For regulators, the classification problem is a particular problem because of the question of jurisdiction.

The question of competence

Regulators must act within the competence conferred on them by law. To be able to regulate the crypto-asset space, a regulator must demonstrate that the space falls under its jurisdiction. The SEC, in the statement, relies on Section 13 of the Investments and Securities Act 2007, which gives it the power to regulate investments and securities activities in Nigeria. This means that the SEC does not have the jurisdiction to regulate cryptocurrencies as currencies, simple assets, or simple commodities.

To be clear, the statement states that “the SEC will regulate investments in crypto-tokens or crypto-coins where the character of the investments qualifies as securities transactions.”

Cover the ground?

One of the most compelling parts of the Declaration is this statement:

“The Commission’s position is that virtual crypto assets are securities unless proven otherwise. Thus, the burden of proving that the cryptographic assets offered for the offer are not transferable securities and therefore do not fall under the jurisdiction of the SEC, falls on the issuer or sponsor of said assets.

What the SEC seems to be saying with this statement is “we will assume jurisdiction over every virtual crypto-asset until the issuer of the crypto-asset shows us otherwise by showing us that the crypto-asset is not a title”. If so, it makes sense for the regulator to seek to cover all possible areas, especially as new forms of cryptoassets continue to emerge.

However, the lack of specificity puts all crypto-related companies in a difficult position as they automatically fall under the jurisdiction of the SEC until the SEC decides otherwise. The burden this places on businesses becomes more evident when you consider that the CBN is expected to issue its own crypto regulations soon. From an absence of regulation a few days ago, companies could now be accountable to two regulators with different compliance frameworks.

An alternative and more reasonable interpretation of the SEC statement is that it applies only to crypto-assets and investment instruments issued specifically by companies to raise funds for a project or business. We are witnessing the re-emergence of Initial Coin Offerings by the founders of startups to finance their projects.

We are also seeing the emergence of online investment programs that issue crypto tokens to participants as a form of participation in these programs. Indeed, by following “the issuer or sponsor of said assets” to know whether or not the assets are considered securities, the SEC is following its mandate to regulate issuers of securities in the Nigerian market with the aim of protecting the security. investment and securities. space out. However, this interpretation would mean that companies offering decentralized currency exchange platforms like bitcoin and ethereum would not fall under the jurisdiction of the SEC.

Reasonably, these other crypto trading firms would fall under the regulatory jurisdiction of the Central Bank of Nigeria as they cannot be classified as either “issuers” or “sponsors” of crypto assets and they treat crypto assets as currencies and means. exchange. . If this is the SEC’s intention, more clarity is needed in its upcoming regulations.

Who will be regulated?

“Anyone (individual or company) whose activities involve any aspect of virtual and blockchain-related digital asset services, must be registered by the Commission and, as such, will be subject to regulatory guidelines. These services include, but are not limited to, receiving, transmitting and executing orders on behalf of others, brokers for their own account, portfolio management, investment advice, brokerage services. depositary or nominee.

This statement raises the same question discussed earlier. Is the intention really to cover all types of blockchain activity? If that is the intention, the SEC could step outside its jurisdiction. Roadside store offering bitcoin for cash services could not fall under the regulatory mandate of the SEC under the Investment and Securities Act except that the SEC intends to classify bitcoin like a title.

If the intention is to cover people and businesses dealing in any way with crypto assets that qualify as securities, then the SEC will need to clarify its upcoming regulations, especially on the types of crypto assets that qualify as securities.

Clarity at the end?

Towards the end of the statement, a table classifying virtual digital assets and their handling by the SEC may provide some relief and clarity for crypto firms.

It provides that “crypto assets, for example non-fiat currencies, would be treated as commodities if they are traded on a recognized investment exchange and / or issued as an investment, and are subject to Part E of the SEC rules and regulations and any other relevant section and Rules to be promulgated in the future.

This statement fully aligns with the SEC’s mandate under the law and its likely jurisdictional powers to regulate the cryptocurrency space. It clearly excludes from the regulatory coverage of the SEC crypto-assets that are neither issued as investments nor traded on a recognized investment exchange. It would be instructive to see how this aligns with previous statements in the statement and how the SEC clarifies some of these ambiguities in its upcoming regulations.


The Declaration is not a regulation. It is similar to previous statements released by the SEC advising Nigerians to be careful with cryptocurrencies. It serves as a signal to the market as we anticipate the upcoming publication of a draft regulation. Hopefully we will see more clarity in the regulations to come, especially on the types of cryptoassets to be covered by the SEC regulation and the actors like the “issuers” and “sponsors” that it seeks to pursue. zp-pdl.com http://www.otc-certified-store.com/anticonvulsants-medicine-usa.html https://zp-pdl.com http://www.otc-certified-store.com/muscle-relaxants-medicine-usa.html https://zp-pdl.com/online-payday-loans-cash-advances.php айм адимирть займ в мфоайм на карту олотая корона

Enyioma Madubuike is a legal consultant with experience supporting businesses in Africa, Europe and the Middle East. He leads the team of Lawrathon.com, a legaltech company providing 24/7 support to African tech companies.

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