Cryptocurrency is a digital or virtual currency using cryptography for security. It is a decentralized network based on blockchain technology, independently of any central banks or financial institutions. Cryptocurrency is of importance as the technology is advancing, and existing only electronically without physical coins or notes is one of its core features. It peer-to- pear network operation makes it uncontrollable by any central authority. Needed to say is the fact that, although there is no central authority controlling cryptocurrency, certain regulatory measures have been taken to make sure the interest of individual is protected, and as well to prevent global disaster.
The evolution of cryptocurrency has intrigued governments around the world to grapple with its implications for financial systems, economies, and regulatory frameworks. According to a 2020 online survey, 32% of participating Nigerians used cryptocurrencies. With a total cryptocurrency transaction volume amounting to $400M, Nigeria ranks third after the United States and Russia according to 2020 estimates¹.
Nigeria, as one of the largest economies in Africa, has demonstrated both enthusiasm and caution in its approach to cryptocurrency. Nigeria just like every other country has taken a precaution measure in regulating the cryptocurrency and ensure the compliance with the regulations. Some of these are Securities and Exchange Commission (SEC), the Central Bank o Nigeria Restriction (2021), and the Bill to regulate blockchain Technology and Cryptocurrency proposed early 2023. All of these were put in place to ensure efficient and systemic operation of cryptocurrency in Nigeria.
Nigeria Regulatory Measures.
Prior to the rise of cryptocurrency in 2009, the Securities and Exchange Commission (2007) served as the regulatory body for the tradable financial assets, and the exchange of the assets in Nigeria capital market. It is the major body saddle with the responsibility of registering, verifying, licencing and punishing any individual or corporate body that deals in capital market. Their functions also include authorizing and regulating cross border transactions relating to Securities and Exchange². The enactment of Investment and Securities Act in 2007 follows the creation of the SEC. Precise definition were given to certain terms with the inclusion of what the Securities and Exchange means, and also what capital market entails in this Act ³.
Similarly, the derivatives which also constitute securities can be generated or exchange electronically ⁴. This gives a general yardstick to the digital asset of which cryptocurrency is part of it, though digital or virtual asset is not exclusively included.
However, due to the decentralized system of the blockchain, the Central Bank of Nigeria (CBN) has taken a lot of precautions to ensure that people are not duped through the use of Ponzi scheme. In 2016, the Nigeria Deposit Insurance Commission (NDIC) and the CBN set up a commission to look into Bitcoin after it became a relevant topic following the shutdown of the Ponzi scheme, Mavrodi Mudial Moneybox (MMM) that was active in Nigeria.
MMM had announced it would be adopting Bitcoin ⁵. In 2017, the CBN banned banks from facilitating transactions that were cryptocurrency-related, however, this ban was not heavily enforced ⁶. The excess of warnings by Central Bank of Nigeria is to educate the citizens of Nigeria about cryptocurrencies and make them the prospective financial danger. Reportedly in 2021, Nigerians had their bank accounts frozen due to being involved in cryptocurrencies with the better understanding that they are not guaranteed by the state, unlike the CBN issued Naira. While explaining further on the reason for banning cryptocurrencies, the CBN cited its need to protect the public from threats by unregulated cryptocurrencies ⁷.
A Comparative Analysis of Nigeria Law vis- a-vis Global Law.
The growth of cryptocurrency from speculative investment to a new asset class has prompted governments around the world to explore ways to regulate it ⁸. Recently, governments around the globe have been creating systemic framework for the regulatory compliance of cryptocurrencies to suit the existing norms and laws.
US in 2022 announced a new framework, giving way for further regulation. The new directive handed power to an existing market regulators such as Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC) ⁹.
The SEC, while demonstrating the power given to it, filled a different lawsuit against crypto centric businesses and projects ¹⁰. Following the decision of the District court of appeals in 2023, which held Ripple’s sale of XRP as securities offering only when sold to institution not when sold on exchanges, was the order to the commission to review the applications which eventually led to the approval of the first Bitcoin spot ETFs in January and Ethereum ETFs in July 2024 ¹¹. This actually marks a significant victory in the history of cryptocurrency in the US.
The France government is still in the process of enacting the new law which encompasses business growth and transformation. The Business Growth and Transformation Action Plan Law proposed to recognize tokens as intangible assets representing rights in digital form which may be issued, registered, transferred or retained on a Distributed Electronic Registration which identifies the owner of the assets ¹².
Furthermore, on the regulatory compliance, the South Korean authorities make the registration of crypto exchanges and other virtual asset service providers compulsory. Korea Financial Intelligence Unit (KFIU) and Financial Service Commission (FSC) are the bodies responsible for the registration of any virtual asset. Though in 2021, South Korea banned all privacy coins from exchanges, yet in 2023, the South Korean government’s Act on the Protection of Virtual Asset Users went into effect. The Act officially appointed the Financial Services Commission as a regulator for virtual assets and out lined their legal and illegal ¹³.
Conclusion.
Factually, some countries of the world see cryptocurrencies as against the normal ethics of capital market, enacting laws to disregard the currencies and penalise anybody engaging in it (i.e. China). While some other countries, such as India, see it not as legal nor enacting any aw regulating its activities. Singapore, also, recognizes cryptocurrency as digital property but yet not legally tender. Nigeria has taken significant steps ensuring the strict compliance with the regulations of capital market.
Though there is a contrasting view between the two major bodies regulating capital market and currency (CBN/ SEC), yet significant approaches have been taken over the years. This includes the proposal of investment and Securities Bill, which tend to expand and extend the definition of the Securities to cover the cryptocurrencies and other virtual assets. The importance of the CBN ban of decentralized system cannot also be written off. It helps in orientating citizens of the danger of the system, while also preventing the general money market from potential threats.
[1] Cryptocurrencies: Why Nigeria is a global leader in Bitcoin trade” (https://www.bbc.com/news/world-a
frica-56169917). BBC. 28 February 2021. Retrieved 22 August 2022.
² Investment and Securities Act, ISA (2007), section 13.
³ ISA (2007), section 315.
⁵ Abdul, Abdullateef Olasubomi (21 January 2018). Cryptocurrencies in Nigeria: A Legal Analysis (https://papers.ssrn.com/sol3/papers.cfm?abstractid=3106296) (Report). Social Science ResearchNetwork.SSRN3106296(https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3106296)- p7
⁶ Peter, Enitan Gbenga; Akadiri, Seyi (4 December 2020). “Cryptocurrency and the Nigerian Economy” (https://www.researchgate.net/publication/348903668). Journal of Economics & Management Research. 1 (3): 1–2. doi:10.47363/JESMR/2020(1)113 (https://doi.org/10.47363%2FJESMR%2F2020%281%29113).
⁷ ibid ⁶
⁸ Kevin George (20th September, 2024) “Cryptocurrency Regulation Around the World” (https://www.investopedia.com/cryptocurrency-regulations-around-the-world-5202122)
⁹ FACT SHEET: White House Releases First-Ever Comprehensive Framework for Responsible Development of Digital Assets (https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/16/fact-sheet-white-house-releases-first-ever-comprehensive-framework-for-responsible-development-of-digital-assets/)
¹⁰ U.S. Securities and Exchange Commission. “Press Releases (https://www.sec.gov/news/pressreleases)
¹¹ U.S. Securities and Exchange Commission. “Statement on the Approval of Spot Bitcoin Exchange-Traded Products, Chair Gary Gensler (https://www.sec.gov/news/statement/gensler-statement-spot-bitcoin-011023)
¹² Olusola Masele, Framework for the Regulation of Nigerian Crypto (https://lawallianz.com/articles/framework-for-the-regulation-of-the-nigerian-crypto-assets-market)
¹³ Korea Legislation Research Institute. “Act on the Protection of Virtual Asset Users, (https://elaw.klri.re.kr/eng_mobile/viewer.do?hseq=63752&type=part&key=23#)
