A cross-section of Blockchain Communities in Nigeria, led by BNUG over a two-day period engaged with Security & Exchange Commission (SEC) in Abuja, Nigeria (on 24-25 July) to brainstorm on issues surrounding the regulatory environments of new Fintech products in an emerging market.
The event was facilitated by fsdAfrica, EFInA and UKaids in partnership with SEC Nigeria who encouraged industry players to get acquainted with their current rules and regulation which typically applies to current participants pending when new rules will be made available. BNUG made a presentation on the State of Blockchain & Virtual Financial Assets in Nigeria on the first day.
Our message was, “Regulate, but don’t stifle the innovation”.
To SEC Nigeria, what matters most to them is not the technology in use rather what a startup or business chooses to do with whichever technology of their choice, blockchain or not. SEC Nigeria regulates the capital/ commodities markets and securities and anywhere anyone does anything in these domains, become SECs business!
Blockchain or no blockchain, if you are going to be trading commodities, in our case, crypto-based-assets, which are classified by SEC as commodities, or raising equity-based funds from the public, like an ICO or STO, etc. then you will have to deal with SEC Nigeria.
It was, by far the most fruitful deliberation with any Regulatory Agency on this subject of blockchain and crypto assets to date. It was an awesome experience.
Some countries are taking a leading role by introducing new crypto-specific legislation. Others have published guidelines for interpreting the existing legal framework in light of the new technologies.
In a sense, the regulators are aiming at a moving target, as criminals are constantly looking elsewhere for potential havens for their illicit activities.
Initially, regulators world over ignore technologies; when they cannot do it any longer they step in cautiously; and finally, when the perceived risks for society overweigh the overall benefit for it, they ban or heavily regulate technological artifacts and their applications. In so doing, they contribute to the last decline stage of a technology – the fourth phase of the cycle – until a new technology reborn from ashes.
The community of blockchain innovators must become more aware of the “ignore, regulate or kill it” 3-stage regulators’ approach in some jurisdiction, to innovation and prevent it from ending up in the third stage by coordinating development actions with the regulatory bodies concerned before it becomes too late.
Specifically, SEC Nigeria will likely regulate these three main types of cryptocurrency businesses:
- “Providers engaged in exchange services between virtual currencies and fiat currencies” (exchanges).
- “Custodian wallet providers” (wallet services).
- ICO, STO, IEO, etc (Equity-based crowd funders)
These three categories will likely become “reporting entities” under the new legislation, whenever SEC says they are ready. This means they will be required to conduct customer due diligence much like traditional financial institutions.
The overall goal is to protect the public from fleecing scammers in the space.
For Nigeria, it’s about time and we will get it right in this time around!