Nancy Ezeonugo, a legal practitioner and investment banker, writes that there should be a framework where cryptocurrency is guided in Nigeria to be a unit of account, store of value and medium of exchange

Fintech and cryptocurrencies which is a digital asset/currency designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets – most notably Bitcoin and Ether in particular present enormous and limitless opportunities. With a growing acknowledgment and acceptance of the technology in Nigeria – both as new and valuable technologies as well as potentially lucrative investment vehicles, it is now apparent that regulators such as the Central Bank of Nigeria (CBN) have taken notice. But what is the opinion of the Nigerian Securities and Exchange Commission (SEC)?



It would be injustice on my part if I fail to mention that the Bitcoin is the perfect symbol of cryptocurrencies as cryptocurrency is the insignia of block-chain technology. With a market capitalization of $284 billion and a current price above $19,000, Bitcoin remains the lion in the jungle of cryptocurrencies. Bitcoin at its core is based on a concept called the block-chain. And for many, it is this concept which is far more interesting than Bitcoin in itself. Further, a block-chain is by its very nature a safe record of things which is very hard to manipulate. The technology can be used across boards like smart contract, e-voting, identity management, healthcare amongst others.

Given the increasing demand for cryptocurrencies, it is no surprise that market participants are responding and racing to satisfy that demand by producing more of such currencies or so-called tokens representing the currencies. Additional digital currencies, or to be precise the tokens representing interests in such currencies, are produced and disseminated by a process colloquially known as an “Initial Coin Offering” or “ICO,” not coincidentally a term which is similar to the better-known term Initial Public Offering (IPO).

The agreement to formally adopt the use in Nigeria by the CBN and the call by the Fintech Association of Nigeria confirms this and it is expected that a regulatory framework for same will be made available, but an exact time or date for its availability is not certain. Cryptocurrencies have a distributed and decentralized nature; granting transactions to be made without intermediaries and giving the players control over their money. Does it then imply that it cannot and should not be regulated?

Central to the availability of the regulatory framework and the threshold question of whether the SEC whose power is derived from the Investment and Securities Act (ISA) has jurisdiction to regulate these activities is the question of whether the token in question is a “security” as defined in the ISA and whether the offer, sale and distribution of such a token (such as via an ICO) would be deemed as an initial offering of a security. A look into the definition of securities in Section 315 of ISA of 2007 does not seem to capture any point on cryptocurrencies as provided below;

“Securities” mean-

(a) Debentures, stocks or bonds issued or proposed to be issued by a government;

(b) Debentures, stocks, shares, bonds or notes issued or proposed to be issued by a body corporate;

(c) Any right or option in respect of any such debentures, stocks, shares, bonds or notes; or

Commodities, futures, contracts, options and other derivatives, and the term securities in this Act includes those securities in the category of the securities listed in a (a) – (d) above which may be transferred by means of electronic mode approved by the Commission and which may be deposited, kept or stored with any licensed depository or custodian company as provided under this Act.