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SEC Nigeria Drafts New Regulations For Digital Commodities (Cryptocurrencies) Investment Platforms Crowdfunding in Nigeria.

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UPDATED — 3rd April, 2020: For clarification purposes, this crowdfunding regulations for digital commodities does not include cryptocurrency.

The Securities and Exchange Commission (SEC) has released proposed rules for crowdfunding in other words fundraising, to foster economic growth and strengthen the capital markets.

According to the news update from Securities Exchange Commision website on Sunday. The required minimum paid-up capital for operating a crowdfunding portal is pegged at N100 million.

Crowdfunding is same as fundraising where a registered company starts a campaign to raise funds and finance a project or business from the public through an online platform.

A crowdfunding portal here is referred to as a website, portal, intermediary portal, application, or other similar module facilitating interaction between fundraisers and their investors

The commission said, “A proposed rule has been developed to provide a regulatory framework permitting private companies with the required structure and mechanism in place to raise capital from the public through crowdfunding.”

Cryptocurrencies—Digital Commodities Investment Platforms:

SEC notes that the N100 million crowdfunding limit set for other Micro, Small and Medium Enterprises (MSMEs) does not apply to digital commodities investment platform where cryptocurrencies fall as commodity. 

“The limits set forth above shall not apply to Micro, Small and Medium Enterprises (MSMEs) operating as digital commodities investment platforms or such other MSMEs as may be designated by the commission from time to time,” it said.

Following the inauguration of the Fintech Roadmap Report earlier this month, Securities Exchange Commission of Nigeria classified cryptocurrency as commodity where equity-based crowdfunding including ICO, STO, IPOs will be regulated.

See Also: Security Exchange Commission of Nigeria Officially Inaugurated the Fintech Roadmap Report for Implementation.

We can recall that in 2018, Binkabi in partnership with AFEX Commodities Exchange launched a blockchain-based digital commodity trading platform to accelerate decentralised agricultural commodity trading in Nigeria.

Registered Crowdfunding

The crowdfunding rules notes that (MSMEs) registered as a company in Nigeria with a minimum of two years operating track record is eligible to raise funds through a crowdfunding portal registered with the commission.

Additionally, cowdfunding portal operating outside Nigeria whose operators actively promotes the crowdfunding directly or indirectly to Nigerian investors will be considered to be actively targeting Nigerian investors. 

Crowdfunding Fees

SEC also notes that the total fees payable to parties to a crowdfunding issue shall not exceed two percent of the total funds raised. Moreso, retail investors might not invest more than 10 percent of their annual income in a calendar year.

Who Can Organise Crowfunding

Only operators registered with the SEC as Crowdfunding Intermediary can manage and operate a crowdfunding portal.

Consequently, entities registered with the Commission as an Exchange, dealer, broker, broker/dealer or alternative trading facility as prescribed under the Act and the SEC Rules and Regulations might be qualified to register as a Crowdfunding Intermediary.

Conclusion:

Crowdfunding intermediary who defaults in any of the rules shall be liable to a fine of not less than N1 million and the sum of N10,000 for every day the violation continues. 

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