Stakeholders Call for Comprehensive Crypto Regulation in Nigeria

Stakeholders have identified the critical role of crypto assets in the global financial system, and called for a comprehensive regulatory framework in Nigeria that seeks  to propel greater interest and investment in the huge potential they offer as well as mitigate associated risks.

The stakeholders drawn from the academia, legislature, capital market, banking and other ancillary sectors, who converged recently at the first annual conference of the Association of Capital Market Academics of Nigeria (ACMAN) were unanimous that crypto assets have come to stay and cannot be wished away in the global financial ecosystem, including Nigeria.

Speaking at the conference with the theme, “Crypto Assets and the Nigerian Capital Market, ACMAN President,  Prof. Uche Uwaleke remarked that  many people believe that crypto assets are  major disruptors of the financial sector, adding that some also consider them as a major risk to the conventional asset classes.

“And when you have such, you consider that as a systematic risk. And when you have a systematic risk,  that is a major risk. A systematic risk is a risk you cannot diversify.

“When you have that kind of risk, the best thing to do is to provide for it, accommodate it,” adding that the conference was designed to find ways of accommodating crypto assets within the regulatory space.

Director General of the Securities and Exchange Commission (SEC), Dr. Emomotimi Agama who delivered a paper on “Crypto Assets and the Nigerian Economy: Implications for Financial Markets Regulation,”  disclosed that over 15,000 cryptocurrencies currently exist globally with Bitcoin being the most popular., stressing that as of now, the total market capitalisation of all cryptocurrencies combined stands at an impressive $2.59 trillion.

Agama stated that with no comprehensive regulatory framework yet in place in Nigeria, what the SEC does on crypto assets is by way of issuing advisory on risk management, adding that it centres around Risk Reward Theory–the higher the risk, the higher the theory.

According to him,  even in the United States of America,  the crypto market is yet to stand on a firm regulation, describing the system there as convoluted.

However, Agama pointed out that one fact that cannot be diminished is that “everyone is beginning to understand that you can’t shy away from from it (crypto),” adding that “we must develop along the thought process.”

To underscore how much Nigerians have come to embrace crypto assets, he disclosed that many people do not have bank accounts, but have crypto wallets.

Citing a 2023 survey, he stated that approximately 33.4 per cent of Nigerians own or use cryptocurrencies. 

“This is one of the highest adoption rates in the world. Beyond remittances, Nigerians use cryptocurrencies for various purposes, including investments, online purchases, and as a hedge against the naira’s devaluation.

“Nigeria is one of the largest recipients of remittances in Africa. Crypto currencies offer a more efficient and cost-effective way for Nigerians abroad to send money home. With traditional remittance fees often being prohibitively high, cryptocurrencies provide a cheaper and faster alternative,” he said, adding that the country is blessed with a youth and tech-savvy population,  a median age of around 18 years, and  a young population that is highly adaptable to new technologies. 

He stressed that the widespread use of smartphones and internet connectivity has facilitated the adoption of digital currencies.

Agama noted that  crypto assets present significant opportunities and challenges for Nigeria’s economy, noting that a balanced regulatory approach was essential to harness their benefits while mitigating risks.

“Collaborative efforts from regulators, industry stakeholders, and the public are crucial for developing effective regulations. I encourage continued dialogue and cooperation to ensure a secure and innovative financial ecosystem.

“The lack of a comprehensive regulatory framework has created uncertainty, which can deter both investors and innovators.

“Cybersecurity threats, including hacking and fraud, pose significant risks. A substantial portion of the population lacks adequate financial literacy, making them vulnerable to scams and risky investments.

Despite these challenges, he said there are numerous advantages in the crypto space.

He disclosed that a bill currently before the National Assembly has copious provisions on crypto assets to take care of investors and mitigate possible risks.

In his goodwill message, the Chairman, Senate Committee on Capital Market, Senator Osita Izunaso said his Committee recognises the critical importance of developing a comprehensive regulatory framework for crypto assets in Nigeria. 

According to him, the committee’s  approach is guided by  principles around investor protection, market integrity, financial stability as well as innovation and growth.

“These are the core areas where we want to focus in building a proper regulation for crypto assets in Nigeria,” he said

Ndubuisi Francis

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