Nigeria’s Securities and Trade Commission (SEC) has issued new legislation governing the issuance, exchange, and custody of digital assets.
The laws provide, among other things, that issuers can only raise funds to ₦10 billion.
More than a year after the commission announced its classification and treatment of digital assets, this development occurred.
A digital asset, according to the Securities and Exchange Commission, is a digital token that reflects assets such as a debt or equity claim on the issuer.
The Central Bank of Nigeria (CBN) ordered financial service providers to stop dealing in cryptocurrency in 2020. However, the SEC’s new rules require that the offering and sale of digital tokens that are deemed securities be registered.
The restrictions will apply to all issuers seeking to raise funds through digital asset offerings, according to the statement.
Digital asset actors include digital asset offering platforms (DAOPs), digital asset custodians (DACs), virtual asset service providers (VASPs), and digital asset exchanges, according to the legislation (DAX).
The SEC stated that it would analyze applications within 30 days before determining whether the proposed digital asset is a “security”.
“The commission may reject any application for registration of digital assets if, in its opinion, the proposed activity infringes public policy, is injurious to investors or violates any of the laws, rules and regulations implemented by the commission”, the regulator added.
Issuers can only raise funds to N10 billion, according to the regulation. However, it stated that the ceiling might be adjusted at any time.
According to the regulation, the SEC would accept a digital assets offering platform (DAOP) — an electronic platform operated by a DAOP operator to offer digital assets — if it presented evidence of ₦500 million in paid-up capital and a current fidelity bond covering at least 25% of the minimum paid-up capital.
A fidelity bond is a sort of insurance that protects against losses caused by employee fraud. Paid-up capital is the amount of money a firm has received from shareholders in exchange for shares of stock.
The legislation stipulates that applicants wanting to establish a DAOP must pay a filing or application charge of ₦100,000, a processing fee of ₦300,000, a registration fee of ₦30 million, and a sponsored individual fee of ₦100,000.
The SEC’s new standards may assist offer the regulatory clarity that a digital asset or security requires.