NIGERIA Law and Practice Contributed by: Isa Alade, Seyi Bella, Ayodele Adeyemi-Faboya and Ayomikun Ogunkanmi, Banwo & Ighodalo
published the Statement on Digital Assets and their Classification and Treatment, whereby the SEC – asserting that all digital assets are securi - ties (unless proven otherwise) and thus subject to its regulatory purview – set out a regulatory framework for digital assets. On the other hand, after two previous circulars warning of the dangers of cryptocurrencies, in February 2021, the CBN issued a circular prohib - iting banks and other financial institutions from facilitating transactions involving cryptocurrency and directing said banks and other financial insti - tutions to identify and close down the accounts of persons operating cryptocurrency exchang - es within their systems. This directive from the CBN was generally regarded as “crypto ban” . Following the crypto ban, the SEC released a statement asserting that there was no conflict between its position and the CBN’s position but that entities affected by the crypto ban would not be admissible to its RI Programme until such entities can operate bank accounts in Nigeria. Notwithstanding the foregoing, in May 2022, the SEC issued the Digital Assets Rules, which sought to establish a framework for the regula - tion and operations of digital assets within Nige - ria. The general expectation, albeit unconfirmed by either regulator at the time, was that entities registered by the SEC under the DAR would be exempted from the crypto ban imposed by the CBN. Twenty months after the issuance of the DAR, the CBN issued the Account Guidelines, which, in essence, confirmed that entities reg - istered as VASPs under the Digital Assets Rules may now operate specialised bank accounts in Nigeria. The SEC subsequently introduced the ARIP as an interim measure to register VASPs and has admitted some entities into its first cohort.
Aside from the actions of the SEC and the CBN, the National Assembly passed the Nigerian Finance Act 2023 in June 2023 (Finance Act). Under the Finance Act, individuals and busi - nesses that buy, sell and trade digital assets (including cryptocurrencies) will be subjected to a deduction of 10% tax on their earnings. Similarly, it will be recalled that VASPs had been included in the MLPA. Relatedly, the CBN issued a Central Bank Digital Currency called e-naira in 2021 and indicated approval for a stablecoin pegged to the naira called cNGN in 2023. In essence, cryptocurrency exchanges have had a profound impact on the regulatory environment in Nigeria, and the regulatory changes have, in turn, affected the fintech market. The absence of a clear-cut regulatory oversight concerning cryp - tocurrency exchanges has significantly impact - ed the financial market, with almost USD2 million lost by a single cryptocurrency exchange plat - form, Patricia. This loss remains unaccounted for, and there were valid concerns at the time that the loss might spill over into the formal pay - ment/banking system. It should be noted that three major fintech com - panies that ceased operations in 2023 were related to cryptocurrency. There is speculation that the high burn rate in the industry is linked to the regulatory challenges faced by participants. With the introduction of an accepted regulatory framework that does not include a ban on cryp - tocurrency, it is anticipated that clear prudential guidelines and remedies will be established to address any other issues that may arise con - cerning cryptocurrency exchange platforms. 6.4 Listing Standards Companies seeking to be listed on the NGX must comply with the NGX’s listing rules in the NGX Rulebook as well as the relevant provi -
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