Regulation
Stakeholders Call for Comprehensive Regulation of Cryptocurrencies in Nigeria
Stakeholders identified the critical role of crypto-assets in the global financial system and called for a comprehensive regulatory framework in Nigeria that seeks to generate greater interest and investment in the enormous potential they offer as well as mitigate the associated risks.
Stakeholders from academia, legislature, capital market, banking and other ancillary sectors, who recently gathered at the maiden annual conference of the Association of Capital Market Academics of Nigeria (ACMAN), were unanimous in their view that crypto assets are here to stay and cannot be suppressed in the global financial ecosystem, including Nigeria.
Speaking at the conference themed, “Crypto Assets and the Nigerian Capital Market,” ACMAN President, Professor Uche Uwaleke, noted that many people believe that crypto assets are major disruptors to the financial sector, adding that some also see them as a major risk to conventional asset classes.
“And when you have such a risk, you consider it a systematic risk. And when you have a systematic risk, it is a major risk. A systematic risk is a risk that you cannot diversify away.
“When you’re faced with this type of risk, the best thing you can do is anticipate it, accommodate it,” adding that the conference was designed to find ways to accommodate crypto assets in the regulatory space.
The Director-General of the Securities and Exchange Commission (SEC), Dr. Emomotimi Agama, who presented a presentation on “Crypto Assets and the Nigerian Economy: Implications for Financial Market Regulation,” disclosed that over 15,000 cryptocurrencies currently exist in the world, with Bitcoin being the most popular, stressing that at present, the total market capitalization of all cryptocurrencies combined stands at a staggering $2.59 trillion.
Agama said that in the absence of a comprehensive regulatory framework yet in place in Nigeria, what the SEC is doing on crypto assets is issuing risk management advisories, adding that it focuses on the risk-reward theory: the higher the risk, the higher the reward theory.
According to him, even in the United States of America, the cryptocurrency market is not yet based on firm regulation, describing the local system as convoluted.
However, Agama stressed that one fact that cannot be underestimated is that “everyone is beginning to understand that you can’t turn away from it (cryptography),” adding that “we have to evolve throughout the thought process.”
To highlight how Nigerians have embraced crypto assets, he revealed that many people do not have bank accounts but have crypto wallets.
Citing a 2023 survey, he said about 33.4% of Nigerians own or use cryptocurrencies.
“This is one of the highest adoption rates in the world. Beyond remittances, Nigerians are using cryptocurrencies for a variety of purposes, including investing, online shopping and hedging against the devaluation of the naira.
“Nigeria is one of the largest recipients of remittances in Africa. Cryptocurrencies offer Nigerians abroad a more efficient and cost-effective way to send money home. With traditional transfer fees often being prohibitive, cryptocurrencies offer a cheaper and faster alternative,” he said, adding that the country is blessed with a young and tech-savvy population, with a median age of around 18, and a youthful population that is highly adaptable to new technologies.
He pointed out 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 to the Nigerian economy, noting that a balanced regulatory approach was essential to harness their benefits while mitigating risks.
“Collaborative efforts by regulators, industry stakeholders and the public are essential to developing effective regulations. I encourage continued dialogue and cooperation to ensure a safe and innovative financial ecosystem.
“The lack of a comprehensive regulatory framework has created uncertainty that can discourage both investors and innovators.
“Cybersecurity threats, including hacking and fraud, pose significant risks. A significant portion of the population lacks adequate financial literacy, making them vulnerable to scams and risky investments.
Despite these challenges, he said there are many advantages in the crypto space.
He revealed that a bill currently before the National Assembly contains many provisions on crypto-assets to take care of investors and mitigate possible risks.
In his goodwill message, the Chairman of the 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 relating to investor protection, market integrity, financial stability as well as innovation and growth.
“These are the key areas we want to focus on to establish proper regulation for crypto assets in Nigeria,” he said.
Francois Ndubuisi
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