Despite banning crypto transactions in February 2021, Nigeria is now considering a new approach to digital asset trading by allowing asset-backed tokens.
According to a recent report by Bloomberg, the Nigerian SEC has opened up the application process for digital exchanges to test tokenized asset offerings.
This move is part of the country’s efforts to boost market participation in the digital asset space.
The SEC has indicated that it may permit tokenized coin offerings backed by assets such as equity, property, or debt, but not cryptocurrencies, on licensed exchanges.
In an interview in Lagos, Abdulkadir Abbas, the SEC’s head of securities and investment services, confirmed this development.
Nigeria’s SEC Testing the Waters on Tokenized-Asset Technology
As Abbas said, the regulator plans to start with clearer assets proposals that are simpler to understand before venturing into more complex ones.
This move may attract tech-savvy individuals and entities to Nigeria’s local assets, including equities.
According to the defunct exchange Paxful, Nigeria accounts for the highest volume of crypto transactions on peer-to-peer trading platforms outside the US, with over 200 million residents.
Nigeria’s SEC plans to register fintech firms as digital sub-brokers, crowd-funding intermediaries, fund managers, robo-advisors, and tokenized coin issuers.
However, it will not permit crypto exchanges until the central bank, which banned crypto transactions in 2021, agrees on a standard.
There will be a trial period during which intended digital exchanges undergo regulatory incubation. During the so-called incubation period, these digital exchanges would offer skeletal services under the SEC’s supervision.
According to Abbas, this step will help the SEC to study and understand their pattern of operations and capacity to render tokenized assets services in Nigeria.
Abbas further noted that the SEC expects to decide which firm to register and whether to extend the incubation period or stop the operation by the 10th month.
Nigeria isn’t the only nation trying tokenized assets. In 2022, Singapore launched a project tagged Project Guardian to explore potential uses of asset tokenization.
Learn more: Globe Echo