Operators in the block chain technology industry have knocked the Securities and Exchange Commission (SEC) over its newly released guidelines to regulate the cryptocurrency market; describing it as “unpatriotic”.
SEC recently released its Digital Assets regulation that is meant to guide how digital assets such as cryptocurrencies are regulated in the country.
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The new rules for Digital Assets, according to the commission, are part of its effort to regulate digital/virtual assets such as bitcoin and NFTs.
The document titled: “New Rules on Issuance, Offering Platforms and Custody of Digital Assets”, covers regulation on five major items ranging from issuance of digital assets to rules that govern digital assets exchanges in the country.
Reacting to the development, a block chain expert, co-founder and Chief Technology Officer at Bekonta, Japheth Johnson, in a chat with Daily Trust, said although the guidelines were a welcome development for the industry, the ingredients of the regulations did not favour the local market.
He said, “This is not the way to go about in regulations. SEC released these guidelines with no consultations whatsoever. Industry players were not carried along. There was no public hearing to aggregate the views of experts. so it will guide them on how to regulate the sector.
“We in the industry feel that someone wants to just monopolise the process to favour foreign companies. If you examine the guidelines, they demand a paid up capital of N500m with 25 per cent equity, then you will need to proceed to NITDA which will also charge you for software evaluation. All these monies are aside registration fees and processes. This is unpatriotic, and then we ask, how many indigenous operators can afford to pay such amount?”
Speaking further he noted that, “Over $2.5bn of crypto currency transactions took place between July, 2020 and early 2021, when it was banned by the CBN. Out of that, domestic companies could not trade over $500m as the volume of transactions came from foreign companies. Now that we the domestic operators are trying to build on this, the SEC wants to sabotage us in the interest of foreign companies like Binance which have the money to pay and recoup their profit in no time, thereby displacing the local companies,”
On the conflicting stand between CBN and SEC, he said, “The Nigerian cryptocurrency market is awaiting the verdict of the CBN as they regard the apex bank to have the final say because they regulate the banks and whatever they tell the banks, that is what they will do.”
Also speaking in a monitored programme by Daily Trust, Senator Ihenyen, Lead Partner at Infusion Lawyers and President of Stakeholders in Block chain Technology Association of Nigeria, expressed similar views on the huge sums of money required to register and operate in the cryptocurrency market as proposed by SEC.
He said, “The idea of registering and licensing Digital Assets Offering Platforms (DAOPs) that serve as electronic platforms for offering digital assets is a welcome initiative. Because DAOPs will be listing digital assets issued by projects or their sponsors, requiring DAOPs to pay registration fees and also meet minimum paid-up capital, and fidelity bonds are understandable requirements.
“But a paid-up capital of N500m and a registration fee of N30m will no doubt be considered prohibitively high for many operators, particularly for local operators. If the primary goal is to have a fair, transparent and efficient virtual assets market, it is debatable whether imposing huge licensing fees and paid-up capital is necessarily the answer.”
He also identified a gap in specifying the application for registering as a Digital Assets Custodian (DAC).
He said, “The obligations of a DAC concerning audit, corporate governance, risk management, conflict of interest, AML-CFT, transaction handling and other related concerns are understandable. The safety of digital assets cannot be compromised. But the rules do not specify application, registration and licensing fees.”
The CBN had on February 5, 2021, directed all Nigerian commercial banks to desist from any form of transaction that had to do with cryptocurrency.
All effort to reach the Director, Corporate Communications at the CBN, to react to the recent guidelines released by SEC and the current stand of the apex bank proved abortive as he did not respond to calls and a text message.