Nigerian financial regulator to permit asset-backed tokens, while crypto remains banned

SEC Nigeria plans to permit asset-backed tokens, while cryptocurrencies will remain banned. This is reported citing Abdulkadir Abbas, head of the Securities and Investment Services Department at the agency, by Bloomberg.

As a pilot regime, the Commission is considering listing tokens on licensed platforms. Such instruments would be backed by assets such as shares, bonds, or real estate.

The agency notes that the initiative could raise local interest in new product categories. According to Paxful, this West African country, with a population of 200 million and 43% of citizens under 14, accounted for the largest volume of activity outside the United States.

The SEC aims to register fintech firms as digital sub-brokers, crowdfunding intermediaries, robo-advisers, fund managers and issuers of tokenised coins.

The regulator does not intend to issue licences to crypto platforms until an agreement on standards is reached with the Central Bank of Nigeria. In 2021, the latter banned commercial financial institutions from providing services to Bitcoin exchanges and to companies dealing with digital assets.

According to Abbas, the platforms will undergo a year of “regulatory incubation.” During this period, firms will offer only basic services, overseen by the SEC to study the structure of their operations and their suitability to provide similar services in the country.

“By the tenth month of their activities we should decide on registering the firm, extending the incubation period, or ordering it to cease operations,” — the official said.

Earlier in late 2022, media reported plans by the Nigerian government to push a bill to legalise the use of Bitcoin and other digital assets.