NIGERIA Law and Practice Contributed by: Isa Alade, Seyi Bella, Ayodele Adeyemi-Faboya and Ayomikun Ogunkanmi, Banwo & Ighodalo
10. Blockchain 10.1 Use of Blockchain in the Financial Services Industry The application of blockchain technology in the Nigerian financial services industry is increas - ingly gaining momentum, as industry players are now utilising it in their service delivery. Notably, in 2022, it was announced that NGX would com - mence using blockchain technology for trade settlement in 2023; however, no further devel - opments were recorded in this regard. Zone’s blockchain continues to spark interest from tra - ditional financial players, but no major reports exist. Relatedly, as mentioned in 7.3 Impact of the Emergence of Cryptocurrency Exchanges , there have been ongoing discussions on adopt - ing cNGN (a stablecoin pegged to the naira). 10.2 Local Regulators’ Approach to Blockchain Blockchain technology is generally unregulated in the Nigerian financial services industry. How - ever, the adoption of blockchain technology via digital or virtual assets is now regulated in cer - tain respects, particularly following the introduc - tion of the Digital Assets Rules and the ARIP, as discussed earlier. 10.3 Classification of Blockchain Assets Per the SEC’s Digital Assets Rules, blockchain assets may be divided into digital assets and vir - tual assets. Digital assets are digital tokens rep - resenting assets such as debt or equity claims on the issuer, whereas virtual assets are digital representations of value that can be transferred, digitally traded, and used for payment or invest - ment purposes. Virtual assets do not include digital representation of fiat currencies, securi - ties and other financial assets.
10.4 Regulation of “Issuers” of Blockchain Assets
The Digital Asset Rules require all promoters/ entities/businesses proposing to conduct initial digital asset offerings within Nigeria (or targeting Nigerians) to submit an assessment form, a draft White Paper, and a legal opinion on whether or not the tokens are securities. The SEC will review the submission, and where the SEC concludes that the assets are securities, the issuer will be required to register such assets. The authors, however, note that the SEC has yet to issue any licence under these rules but has issued some approvals under the ARIP. 10.5 Regulation of Blockchain Asset Trading Platforms Blockchain asset trading platforms are regulated under Part D – Rules on VASPs and Part E – Rules on Digital Asset Exchange (DAX) of the Digital Assets Rules. VASPs are required to register under Part D by filing the appropriate SEC forms and submitting all required documents. VASPs have various obligations, including monitoring and ensuring compliance with its rules, ensuring fair treat - ment of its users, and obtaining and retaining self-declared risk acknowledgement forms from users before their investment. DAX operators must comply with general requirements for VASPs and seek registration as DAX operators under Part E. There are vari - ous regulatory restrictions/obligations for DAX operators. These obligations include reporting obligations and the submission of rules to the SEC. Perhaps the most prominent restriction is the prohibition of DAX operators from facilitating the trading of any virtual/digital asset unless the SEC has issued a no-objection to the trading of the virtual digital asset.
579 CHAMBERS.COM
Powered by FlippingBook