The recent U.S. court decision recognizing Bitcoin and Ether as commodities has sparked a fervent discussion in Nigeria about the potential for similar classification.
Despite growing pressure from industry stakeholders, the Nigerian Securities and Exchange Commission (SEC) still needs to follow suit.
Calls for Clear Crypto Classification Rules
Lucky Uwakwe, chairman of the Blockchain Industry Coordinating Committee of Nigeria (BICCoN), emphasizes the Nigerian SEC’s need to establish specific regulations categorizing cryptocurrencies as securities or commodities. “The Nigerian SEC should consider how the US categorizes these assets and adapt those standards to fit our local context,” Uwakwe stated.
He argues that clear, tailored regulations would provide much-needed clarity and guidance for cryptocurrency creators, aiding in compliance and innovation within the sector. However, Uwakwe highlighted the complexities introduced by different cryptocurrency protocols, like proof-of-stake (PoS) and proof-of-work (PoW), which could influence their classification.
The challenge of non-physical commodities
Oladotun Wilfred Akangbe, chief marketing officer at Flincap, also voiced his opinions, noting the significant intrinsic value of foundational cryptocurrencies such as Bitcoin and Ethereum.
He suggests these should be treated distinctly from other digital assets, especially in regulatory approaches. “These primary cryptocurrencies have evolved into valuable commodities, and our regulations need to reflect this,” Akangbe explained.
He also pointed out the potential for cryptocurrencies to serve as instruments for fundraising, such as in initial coin offerings (ICOs), which require a different regulatory focus.
Nigeria’s Crypto landscape and regulations
Despite a stringent stance from the Central Bank of Nigeria (CBN) in February 2021, which banned financial institutions from processing cryptocurrency transactions to mitigate risks like money laundering and terrorism financing, the Nigerian cryptocurrency market has flourished. This ban led to a surge in peer-to-peer (P2P) trading, with platforms like Paxful seeing a 137% increase in registrations in Nigeria over three months following the ban.
The launch of the naira, Nigeria’s central bank digital currency, in October 2021, aimed at enhancing financial inclusion and simplifying cross-border transactions, shows the country’s complex relationship with digital currencies.
The CBN revised its guidelines in December 2023, allowing for some banking interactions with Virtual Assets Service Providers (VASPs) and setting minimum standards for these relationships.
Despite these efforts, Nigeria’s transaction volume in cryptocurrencies rose 9% year-over-year to $56.7 billion from July 2022 to June 2023, underscoring the robust activity in the sector. A recent survey indicated that 35% of Nigerians aged between 18 and 60 are engaged in cryptocurrency investments or trading.
Given these dynamics and the government’s continuing cautious stance, it remains improbable that Nigeria will classify Bitcoin and Ethereum as commodities in the foreseeable future.