The recent Illinois court decision that classifies Bitcoin and Ether as commodities has triggered a heated debate in Nigeria. Many stakeholders are now pushing the Nigerian Securities and Exchange Commission (SEC) to take a similar stand. It probably won’t though.
In an interview, Lucky Uwakwe, chairman of the Blockchain Industry Coordinating Committee of Nigeria (BICCoN), said:
“The Nigerian SEC should keep in mind the need to make rules that define the asset class of crypto assets or break respective crypto into asset classes and explain to the public how such crypto qualifies to be called securities or commodities.”
He believes that clear guidelines would give creators a roadmap for regulation. However, he pointed out that the inherent difference between proof-of-stake (PoS) and proof-of-work (PoW) protocols could change how specific crypto assets are classified.
Uwakwe added that, “The Nigerian SEC should look at how the US is doing it and try to make similar rules that fit our environment.”
In Nigeria, the Commodity Board has traditionally focused on physical commodities like cash crops and agricultural products. Digital commodities haven’t been a major focus yet.
Oladotun Wilfred Akangbe, chief marketing officer at Flincap, a platform for African over-the-counter crypto exchanges, also shared his thoughts. He said:
“Foundational cryptocurrencies such as Bitcoin and Ethereum have become very valuable commodities such that assets are priced in them.”
He stressed the need for different regulatory approaches for Bitcoin and Ethereum compared to the other cryptocurrencies. Akangbe believes the SEC should focus on using cryptocurrencies as fundraising instruments, like initial coin offerings (ICOs).
In February 2021, the Central Bank of Nigeria (CBN) banned all banks and financial institutions from engaging in all kinds of cryptocurrency transactions.
They claimed this was to curb money laundering and terrorism financing. However, this ban didn’t make Nigerians budge. Instead, they flocked to peer-to-peer (P2P) platforms like Paxful.
Paxful saw a 137% increase in new registrations in Nigeria in literally three months. The country quickly became the second-largest Bitcoin trading market after the US, with $2.4 billion worth of cryptocurrency traded by May 2021.
Later in October, Nigeria launched the eNaira, its own central bank digital currency (CBDC). The eNaira is pegged to the Nigerian naira and was apparently created to promote financial inclusion and streamline cross-border payments.
The CBN issued new guidelines in December 2023 to regulate Virtual Assets Service Providers (VASPs). These guidelines included minimum standards for banking relationships with VASPs and ensure effective monitoring and risk management.
They replaced the CBN’s 2021 circular that banned banks from engaging with crypto service providers. The Nigerian crypto market is thriving despite these regulatory obstacles.
According to a 2023 report, Nigeria’s crypto transaction volume surged by 9% year-over-year to $56.7 billion between July 2022 and June 2023. A recent study found that 35% of Nigerians aged 18-60 are investing or trading in cryptocurrencies.
All these have done nothing to change the government’s mind on cryptocurrency. And judging by current situations, Nigeria will likely never classify Bitcoin and Ethereum as commodities.