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Regulation

Nigeria regulators recognize digital assets in stunning new statement

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The Securities and Exchange Commission of Nigeria has officially defined digital assets under its regulatory umbrella. 

In a Sept. 14 statement, the Nigerian Securities and Exchange Commission, or SEC, defined tokens and coins in the country’s financial markets. The commission stated that these digital assets, which provide “alternative investment opportunities”, would be classified into four different categories for regulatory oversight.

“Virtual crypto assets are securities, unless proven otherwise,” said the SEC. “The burden of proving that the crypto assets proposed to be offered are not securities and therefore not under the jurisdiction of the SEC, is placed on the issuer or sponsor of the said assets.”

According to the announcement, Nigerian regulators will register and approve all digital assets, treating cryptocurrencies and utility tokens as commodities. The SEC stated it would not be responsible for overseeing utility token spot trading and transactions. The regulatory body said it would view security tokens as securities, and derivatives and investment funds as “specified investments.” 

“The general objective of regulation is not to hinder technology or stifle innovation, but to create standards that encourage ethical practices that ultimately make for a fair and efficient market.”

Blockchain and crypto firms releasing Digital Assets Token Offerings, or DATOs, Initial Coin Offerings, or ICOs, and Security Token Offerings, or STOs, operating in Nigeria prior to the implementation of these new regulations will have three months to register with the SEC.

Public statements from the Nigerian SEC regarding crypto and virtual currencies are rare. In early 2017, the commission warned citizens to apply caution in their approach towards investing in cryptocurrencies as they might experience “financial losses” without guaranteed protection from the regulatory body. 

However, interest in crypto from its citizens may be driving Nigerian regulators to quickly rein in this budding market. 

According to Google Trends, the country consistently ranks first worldwide in online searches for “Bitcoin” — more than twice the traffic of Ghana or South Africa. Blockchain analytics firm Chainalysis reported on Sept. 10 that Nigeria, South Africa, and Kenya lead the continent in monthly crypto transfers, which total $316 million as of June. As of writing, Nigeria is also one of the biggest sources of Bitcoin (BTC) trading volume in Africa and one of eight on the continent to host a Bitcoin ATM, as of April. 

As Cointelegraph reported in July, Chris Maurice, the CEO of Nigeria-based exchange Yellow Card, said:

“In terms of the crypto scene and everything, things are growing very rapidly, really across the continent, but specifically in Nigeria, South Africa, Ghana, and Kenya […] At this point, it’s just a matter of time before it continues to expand outward to the rest of the continent.”



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Regulation

Fed governor says CBDCs remain ‘a solution in search of a problem’

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Chris Waller, a member of the Board of Governors of the Federal Reserve System, seems to think it’s unnecessary for the U.S. government to develop a central bank digital currency.

Speaking with Michael Strain of the American Enterprise Institute today, Waller said he was “highly skeptical” of a central bank digital currency, or CBDC, addressing issues in existing payment systems. He feels that the U.S. government should only intervene with a potential digital solution in the event of significant market failures.

“I am not convinced as of yet that a CBDC would solve any existing problem that is not being addressed more promptly and efficiently by other initiatives,” said Waller.

He added:

“The private sector is already developing cheaper payment alternatives to compete with the banking system, hence it seems unnecessary for the Federal Reserve to create a CBDC to drive down payment [systems] we see by banks […] Facilitating speedier payments is not a compelling reason to create a CBDC.”

Screenshot from American Enterprise Institute

Specifically, the Fed governor said he believed the government should not be competing with the private sector given the potential benefits of a CBDC may be outweighed by privacy concerns and would likely not address the issue of financial inclusion or encourage faster and cheaper payments. Waller cited a 2019 survey from the Federal Deposit Insurance Corporation, estimating that only 1% of households in the United States were both unbanked and might be interested in using a CBDC.

Related: Fed Chair says stablecoins need stricter regulation, speaks on CBDC

However, Waller also expressed concern with potential CBDC designs giving the Fed access to “a vast amount of information” from account holders. According to the Fed governor, The system would make it a tempting target for hackers, and be more akin to China monitoring the transactions of its citizens with the digital yuan.

“A CBDC remains a solution in search of a problem.”

Waller’s comments come two months after Fed chair Jerome Powell said the government agency would be issuing a discussion paper on CBDCs in the United States, calling on the public to comment “on issues related to payments, financial inclusion, data privacy, and information security.” Powell said the paper would be released sometime this summer, giving the Fed roughly six more weeks to publish.

Unlike Waller, Powell’s public statements on CBDCs have seemingly been more measured, often saying it is more important “to get it right than it is to be first” when it comes to rolling out a digital dollar. President of the Dallas Federal Reserve Robert Kaplan also said in November that it is “critical that the Fed focuses on developing a digital currency.”

Other U.S. lawmakers have spoken in favor of CBDCs when comparing a central bank issued digital currency with cryptocurrencies like Bitcoin (BTC). Democratic Senator Elizabeth Warren said in June that the tokens had “great promise,” calling CBDCs “legitimate digital public money” that could drive out “bogus digital private money” like crypto.