An Examination of the Regulatory Framework for Initial Coin Offerings in Nigeria

Since the first digital currencies were introduced to the investing public, financial regulators, businesses, and consumers have wrestled with comprehending how crypto-assets function, as well as how to employ them in commercial transactions, while at the same time, reducing the risks attached to such innovative instruments. With the spectacular acceleration in exchange rates between crypto-assets such as Bitcoins and Fiat currencies, as well as the increased use of crypto-assets in cross border capital transfers, Crypto-assets appear to have come to stay. As more promoters seek to bring more crypto-assets and allied products into the market space, Initial Coin Offerings have evolved as a mode of fund-raising. Initial Coin Offerings hold the potential for profitable opportunities, whilst posing a significant threat to traditional models of secured asset offerings. Our study suggests that many investors view investing in an Initial Coin Offering as an exciting way participate in the crypto-asset markets at a low cost. However, while market participants evolve models for self-regulation and work towards creating regulatory certainty, there is a need to take a proactive view towards investor protection. This is due to the volatility and over-valuation of this asset class, as well as the risk of crypto-assets being used for fraud, terrorism finance and money laundering. This article reviews developments in the crypto-asset marketplace, evaluating Nigerian regulations that pertain to cryptocurrencies and their transactors against the backdrop of global developments within the crypto-asset space. We examine regulations, rulings, press releases and other documentation related to regulation of this asset class. Our study suggests that the Nigerian regulatory approach, which was initially ambiguous has changed to a more hardline policy, notably the restriction of banks from transacting in crypto-assets. We make recommendations towards a harmonized application of securities laws to ICOs