In Nigeria, there are no specific legislations and regulations on blockchain & cryptocurrency. What applies presently are existing general laws and regulations, which includes regulations by the Central Bank of Nigeria (CBN), the Securities and Exchange Commission (SEC), and other relevant regulators in the virtual assets space.
Over the next two years, it is expected that the regulatory landscape in Nigeria will evolve from the present state of relative legal uncertainty to a state of greater legal certainty.
Specifically, with regard to security token offerings (STOs), it is expected that the Securities and Exchange Commission (SEC) will put in place a framework to regulate the securities aspects of virtual assets in Nigeria. I expect that a specific licensing regime would be introduced. Whether the SEC’s regulatory requirements will support or stifle innovation will depend on the SEC’s policy, its appetite for balancing innovation against investor protection and the general direction of the government on blockchain. The SEC is currently considering a regulatory framework for virtual assets in Nigeria.
In the financial services industry, where the Central Bank of Nigeria (CBN) is the regulator, it is thought unlikely that the CBN will put in place any specific regulations for cryptocurrencies in the next two years. This is largely due to the CBN’s conservative and very cautious approach thus far. Introducing specific cryptocurrency regulations may be considered – rightly or wrongly – as official recognition or acceptance of cryptocurrencies in Nigeria. Therefore, cryptocurrencies will most likely remain a decentralized currency adopted and accepted at the adopter’s or owner’s risk. Regarding possible regulation, there are no pending changes at present.
From a tax perspective, the Federal Inland Revenue Service (FIRS) has so far been silent about the tax treatment of virtual assets in Nigeria. Regardless of whether the FIRS treats a particular virtual asset as a commodity, cryptocurrency, property or security, its current policy of expanding the tax net will doubtless come into play.
Lastly, as regards blockchain applications in other industries – including agriculture, entertainment, justice, health, real estate, sport, supply chain and other industries beyond financial services – regulation may not be expected in the next two years. This is because blockchain applications in these areas are still in their infancy. Although the government may begin to consider the use of blockchain applications in relation to elections, land registers, public contracts and similar areas of public interest, the regulatory landscape is not expected to change much for now.
Join me on the next edition of Pizza where I will be discussing the traps and tips for players in the blockchain and cryptocurrency industry.
Senator Ihenyen is the Lead Partner at Infusion Lawyers. He is the Exclusive Contributor (Nigeria), the Blockchain Comparative Guide 2020 in partnership with Dentons. Senator is currently the General Secretary of the Stakeholders in Blockchain Technology Association of Nigeria and the Editor-in-Chief, Pizza.