The Nigerian government says it is processing applications for digital exchanges that will allow trading in asset-backed tokens. The decision is to extend market participation in the country and will be on a trial basis, the Securities and Exchange Commission announced.
Although the central bank does not accept crypto trading, SEC says it is now considering permitting tokenized coin offerings on licensed digital exchanges that are backed by assets including equity, debt, property.
“We always like to start, as a regulator, with a very simple clear proposal before we go into the complex ones,” Abdulkadir Abbas, head of securities and investment services at the Securities and Exchange Commission, said, according to Bloomberg.
– Learn more
Tokenized coins, also known as asset-backed tokens, are a type of cryptocurrency that represents a specific asset or a group of assets. This means the value of the token is derived from the underlying asset or assets, such as equity, debt, or property.
The asset-backed tokens can be bought, sold, or traded on digital exchanges, just like other cryptocurrencies. Tokenized coins are often seen as a way to offer investors exposure to traditional assets in a more liquid and accessible way, while also benefiting from the advantages of blockchain technology, such as transparency, security, and speed of transactions.
The SEC’s move will hopefully drive young Nigerians to participate in the investing market and make local assets including equities, which has been ignored for years more appealing to digitally-savvy people in the country.
Outside of the United States, Nigeria accounts for the largest volume of cryptocurrency transactions done on peer-to-peer trading platforms, according to figures by Paxful, an exchange that folded up in April.
– Key points to note
SEC plans to register fintech firms as digital sub-brokers, crowd-funding intermediaries, robo-advisors, fund managers and tokenized coins issuers to run the trial process. Again, crypto exchanges will not be registered till the Central Bank sets standards, Bloomberg reported.
According to Mr Abbas, intending digital exchanges will undergo a year of “regulatory incubation” during which they will only offer skeletal services monitored by the SEC to study the pattern of their operations and fitness to render the services in the country.
“By the 10th month, we should be able to make a determination whether to register the firm, extend the incubation period or even ask the firm to stop operation.”
– Blockchain policy
In 2021, the Central Bank of Nigeria ordered commercial lenders not to facilitate crypto transactions within the platforms, a decision that almost crippled the sub-sector.
The latest decision follows a growing trend among countries who have tried the potential uses of asset tokenization.
In 2022, Singapore commenced a trial asset tokenization scheme called “Project Guardian.” The pilot involves the creation of a permissioned liquidity pool comprising tokenized bonds and deposits.
The Nigerian government on Wednesday approved a national blockchain policy for the country.
“With the approval of the National Blockchain Policy, we can safely say that blockchain technology with all its components and types have been institutionalised in the country,” Isa Pantami, minister of communications and digital economy, made the announcement after cabinet meeting.
A blockchain is a decentralised, distributed and public digital ledger used to record transactions across many computers. Such records cannot be altered retroactively without the alteration of subsequent blocks and the consensus of the network.
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