Why We Decided To Regulate And Not Ban Cryptocurrency – SEC

The Securities and Exchange Commission (SEC) said it has suspended the admittance of affected persons into its Regulatory Incubation Framework for Fintech firms.

Recall that SEC, the apex regulator of the nation’s capital market, had in September 2020 described digital assets, including crypto assets, as securities, saying it would regulate them.

But the CBN ordered banks in the country to shut down the accounts of cryptocurrency traders.

The CBN in its directive, told Deposit Money Banks (DMBs), Other Financial Institutions (OFIs), and Non-Bank Financial Institutions (NBFIs) local financial institutions to stop any transactions in crypto or facilitating payments for crypto exchanges.

The apex bank in the circular signed by Director of Banking Supervision, Bello Hassan, and Director, Payments System Management Department, Musa I Jimoh warned that disobedience to the directive will attract sanctions.

“Breaches of this directive will attract severe regulatory sanctions,” the CBN warned

In a statement on Thursday, SEC has 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.”

“Subsequently, 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.”

Regulatory Incubation Framework

Speaking further, the Commission said 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.”

SEC said the planned implementation of the SEC Regulatory Incubation Guidelines for fintech firms intending to introduce innovative models for offering capital market products and services would continue.