Nigeria Regulates Crypto After Bowing to Bitcoin Adoption

In stark contrast to the country's previously cynical approach to cryptocurrencies, Nigeria's Securities and Exchange Commission has moved to regulate the crypto sector—with the intent to protect investors and promote industry standards.

"The general objective of regulation is not to hinder technology or stifle innovation, but to create standards that encourage ethical practices," Nigeria's SEC said in a statement on Monday, adding that it would only regulate "when the character of the investments qualifies as securities transactions."

However, per the regulator, all cryptocurrencies are deemed securities until shown otherwise. The burden of proof lies with cryptocurrency-based exchanges and issuers who are expected to demonstrate why their crypto constitutes—or indeed, does not constitute—a security classification.

The new edicts also stipulate that all issuers and blockchain-based companies dealing with cryptocurrencies are expected to register with the SEC.

"Such services include, but are not limited to reception, transmission and execution of orders on behalf of other persons, dealers on own account, portfolio management, investment advice, custodian or nominee services," reads the SEC statement.

If You Can't Beat Them, Regulate Them

Until now, Nigeria's stance on crypto has been rather hostile. In 2017, the Central Bank of Nigeria (CBN) issued a circular to all financial institutions banning crypto transactions and operations and warning of unregulated exchanges and a supposed susceptibility to criminal abuse. 

Still, despite initial reticence toward crypto regulation, Nigeria's developing adoption of Bitcoin has seemingly forced the hand of its financial authorities.

According to Chainalysis' 2020 Global Crypto Adoption Index, Nigeria places 8th among 154 countries for its significant on-chain cryptocurrency activity.

Supporting this notion, data from trading analytics site Useful Tulips shows that peer-to-peer (P2P) Bitcoin trading volumes in Sub Saharan Africa are some of the highest in the world—second only to North America.

Out of the 20 countries south of the Sahara, Nigeria stands in pole position for P2P Bitcoin trading with weekly volume averaging $7.3 million—down from an all-time high in late July of $10.3 million.

With crypto interest burgeoning in the west African country, it's no surprise that the Nigerian SEC is attempting to claim back some semblance of control.