SEC Gives Reasons for Approving Digital Exchanges

The Securities and Exchange Commission (SEC) has clarified that its recent decision to grant approval-in-principle to two cryptocurrency exchanges, Busha Digital Limited and Quidax Technologies Limited, is aimed at encouraging youth participation in Nigeria’s capital market while ensuring adequate investor protection.

Emomotimi Agama, the Director-General of the SEC, highlighted that the move aligns with President Bola Tinubu’s commitment to engaging Nigeria’s youthful population. Agama explained that the approval will create a structure that enhances the participation of young Nigerians in the capital market, particularly in the digital asset space.

“A lot of young Nigerians are fully involved in digital assets, and we cannot shut the door against them,” Agama said. “Rather, the intention of Mr. President is to have them inclusive in the capital market, and that is why we are ensuring that there is regulation and no one is hurt at the end of the day. That’s our responsibility at the SEC, by protecting investors and developing the market.”

Agama emphasized that the commission’s approval is still at an incubation stage, describing it as a “controlled experiment.” He said the SEC will closely monitor the operations of the exchanges to assess the risks they pose to the economy, investors, and themselves as operators.

“It gives us an opportunity to know exactly what they are doing, the risks they pose to our economy, investors, and even to themselves,” he explained. “We are making sure they operate within regulations similar to what is obtainable in other jurisdictions.”

Agama explained SEC’s regulatory approach to digital exchanges is part of a broader strategy to embrace innovation without compromising market stability.

The commission’s Virtual Assets Service Providers (VASP) Regulation framework allows the SEC to fully understand crypto exchanges and virtual financial assets, safeguarding the financial ecosystem from potential risks.

“In our bid not to stifle innovation, we set up a ‘Sound Box’ to understand exactly what these companies are getting into, how it affects customers, the Nigerian public, and the economy,” Agama added. “It is important that they meet the necessary regulatory guidelines before full approval is granted.”

He noted that the SEC is committed to fostering trust and confidence in the capital market, particularly as it relates to integrating digital asset exchanges into the regulated environment.

The introduction of these exchanges, Agama said, opens up new opportunities for younger Nigerians who have shown growing interest in the digital asset space.

“By including these innovations within the broader capital market structure, we are ensuring a balance between fostering innovation and protecting investors,” Agama concluded.