0
0
It’s been more than a year since the Central Bank of Nigeria (CBN) issued a circular to banks and other financial institutions prohibiting cryptocurrency transactions and facilitating payments for crypto exchanges. It is prohibited for Nigerian banks to serve customers who deal in crypto assets.
However, there are indications that the Nigerian government is putting in place necessary structures needed for Nigeria to be a part of this global financial revolution. On May 11, 2022, the Securities and Exchange Commission (SEC) consolidated the Proposed Rules and issued New Rules on Issuance, Offering Platforms and Custody of Digital Assets. The new Rules will regulate the following:
(i) Issuance of Digital Assets as Securities;
(ii) Digital Assets Offering Platforms (DAOPs);
(iii) Digital Asset Custodians (DACs);
(iv) Virtual Assets Service Providers (VASPs); and
(v) Digital Assets Exchange (DAX).
This new rules will affect companies issuing and trading digital assets as securities; companies with platforms offering digital assets; companies carrying on business as digital assets custodians (such as digital asset wallet services); companies with platforms facilitating the exchange of digital assets; and companies that facilitate the transfer of, issuance of, or sale of virtual assets. The Rules also appear to cover fintechs providing financial services on the platform.
According to the rules, digital assets are digital tokens that represents assets such as a debt or equity claim on the issuer while virtual assets are digital representation of value which can be used as a medium of exchange/payment, or a unit of an account and is traded digitally.
.
| Issuance of Digital Assets as Securities | Virtual Asset Service Providers (VASP) | Digital Asset Offering Platforms(DAOP) | Digital Assets Custodians(DAC) | Digital Assets Exchange(DAX) | |
| Registration per category | Companies that issue digital assets to Nigerian are required to register under this category. | Companies that facilitate exchanges between fiat and virtual assets; and transfer or store virtual asset for Nigerian, are required to register under this category. | Companies that operate electronic platforms for offering digital assets to the public are required to register under this category. | Companies that maintain, store, and hold digital asset, are required to register under this category. | Companies that operate an electronic platform for facilitating the trading ofa virtual or digital asset, are required to register under this category. |
| Minimum paid up capital | The Rules do not state the capital requirement for this category | The Rules do not state the capital requirement for this category | The minimum paid up capital is 500 million naira and a fidelity bond covering 25% of the paid up capital of the company | The Rules do not state the capital requirement for this category | The minimum paid up capital is 500 million naira and a fidelity bond covering 25% of the paid up capital of the company |
| Directors and management requirements | The directors and senior management staff are to hold 50% of the shares in the company.Although not stated in the rule, it is likely that the appointment of the directors will be subject to the approval of the SEC | VASP are required to have a physical office managed by a director.A director should be a person of integrity.Although not stated in the Rules, it is likely that the appointment of the directors will be subject to the approval of the SEC | The CEO and principal officers are required to hold relevant university degrees and have 5 years cognitive experience.The CEO can only hold the office for two terms of 5 years each (total of 10 years).The Rules clearly states that the Appointment of the directors is subject to the approval of the SEC.A director should be a person of integrity. | A director should be a person of integrity.Although not stated in the rule, it is likely that the appointment of the directors will be subject to the approval of the SEC | The CEO and principal offciers are required to hold relevant university degrees and have 5 years cognitive experience.The CEO can only hold the office for two terms of 5 years each (total of 10 years).The Rules clearly states that the Appointment of directors in this category is subject to the approval of the SEC.A director should be a person of integrity. |
| Limitations | Issuers cannot raise funds exceeding 10 billion naira within 12 months. Issuers are also not permitted to accept investment of over 200,000 naira from retail investors. | Where the VASP is regulated by another sector regulator, it is required to submit a letter of No Objection from the other regulator. | Where the payment service function is outsourced, a no objection of the Central Bank of Nigeria (“CBN”) must be obtained. | A DAC is not to outsource any decision making and client relations function in the company. The board will remain liable for all outsourced functions. | A DAX is to obtain a “No Objection” from SEC before trading any virtual or digital asset.The approval of SEC must be obtained prior to publishing its user fees. |
