On this piece Olumide Babalola argues that the Central Financial institution of Nigeria (CBN) overstepped its regulatory boundaries by usurping the statutory powers of the Safety and Alternate Fee (SEC) to manage securities within the mould of cryptocurrencies.
I selected this caption advisedly, despite my understanding of the Central Financial institution of Nigeria’s letter dated February 5, 2021 prohibiting “dealing in cryptocurrencies or facilitation of fee for cryptocurrency exchanges.” However, I’ll try to justify the caption of my intervention by briefly answering the next questions:
Are cryptocurrencies authorized tenders inside the regulatory purview of the Central Financial institution of Nigeria (CBN)?
The CBN would appear to have answered this query of their letter dated January 12, 2017 that: “The CBN reiterates that VC resembling Bitcoin, Ripples, Monero, Litecoin, Dogecoin, Onecoin, and so on and related merchandise will not be authorized tenders in Nigeria….”
Since cryptocurrencies will not be authorized tenders, one wonders the place the CBN derives its arrogated powers to manage cryptocurrency exchanges particularly for the reason that provision of part 2 of the CBN Act and part 1 of the Banks and Different Monetary Establishments Act clearly outline the sides of CBN’s powers and capabilities, but none contemplates regulation of “exchanges” within the mould of digital currencies. I stand to be corrected on this interpretation although.
Apparently, for the reason that CBN was doubtful as to the character of and applicable regulatory company for cryptocurrencies, on the 14th day of September, 2020, the Securities and Alternate Fee (SEC) waded in and cleared CBN’s doubts by issuing an announcement to the impact that: “The place of the Fee is that digital crypto property are securities, except confirmed in any other case” https://sec.gov.ng/statement-on-digital-assets-and-their-classification-and-treatment/ Accessed on February 8, 2021
On regulating cryptocurrencies, SEC went forward to state of their round that: “Equally, all Digital Belongings Token Providing (DATOs), Preliminary Coin Choices (ICOs), Safety Token ICOs and different Blockchain- primarily based presents of digital property inside Nigeria or by Nigerian issuers or sponsors or overseas issuers concentrating on Nigerian buyers, shall be topic to the regulation of the Fee.”
From SEC’s intervention as seen of their round, it’s indubitable that CBN, with respect, jumped the gun by prohibiting “dealing” in an asset over which they don’t have regulatory management and such a knee-jerk method offers an impression of an ill-timed and “unthought out” entry into an unfamiliar terrain since they admitted of their letter of January 12, 2017 that the realm is “unregulated.”
Fortunately, SEC’s place that cryptocurrencies are securities finds help in a US resolution in United States of America v Maskim Zaslavskiy (17 CR 647) the place District Decide Raymond Dearie dominated that cryptocurrency is a safety and that it might fall below the United State’s Safety Alternate Fee’s purview.
Sufficient stated on this!
Ought to CBN’s Letter supersede SEC’s assertion on cryptocurrencies?
Part 13 of the Investments and Securities Act (ISA) establishes SEC because the apex regulator of securities. Chambers Dictionary defines the phrase ‘apex’ as “the best level.” Therefore, it’s our modest view that CBN ought to ordinarily keep away from digital currencies since it’s outdoors their areas of competence which must be within the unique protect of the SEC.
The CBN’s letter was neither known as a round nor a regulation, therefore the authorized weight to be connected comes into query. Even when it bears such nomenclature, since SEC is designated the apex regulator of securities by the ISA, then their place ought to at all times override that of CBN on points bordering on cryptocurrencies.
Does the CBN’s letter criminalise dealing in cryptocurrencies or facilitation of fee for cryptocurrency exchanges?
Though CBN’s letter expressly prohibits dealing in cryptocurrency, the supply (if any) of such powers is suspect. Assuming they even have such imaginary powers, the courts have dominated that, an offence can’t be created by an administrative round or letter.
For correct context, in Omatseye v Federal Republic of Nigeria (2017) LPELR- 42719 (CA), the Courtroom of Enchantment held that:
“Administrative circulars or notices have its place in authorities however can not create an offence. The apex Courtroom within the case of Maideribe v. FRN (2013) LPELR-21861(SC) on circulars held thus: “ Such circulars are- “a typical type of administrative doc by which directions are disseminated; many such circulars are recognized by serial numbers and printed and plenty of of them include normal statements of coverage… they’re subsequently of nice significance to the general public giving a lot steering about Governmental group and the train of discretionary powers. In themselves they don’t have any authorized impact in any way, having no statutory authority. Exhibit “PD16z” shouldn’t be recognized to regulation and subsequently can not create an offence as a result of it was not proven to have been issued below an order, Act, Legislation or statute. Within the absence of statutory authority within the stated Exhibit “PD16z” or authorized discover it can’t be stated to have any authorized impact.”
Till the opposite is established, it’s our humble place that, the CBN’s letter dated February 5, 2020 stays within the realm of a mere (administrative) letter as admitted by its final paragraph that: “This Letter is with instant impact” (Emphasis mine). Therefore, it can not create an offence upon which the Nigerian Police can arrest or harass any supplier in cryptocurrency, as one can already think about.
Can the Police arrest sellers in cryptocurrencies?
As at press time, there isn’t any regulation that criminalizes dealing in cryptocurrencies in Nigeria to my data because the provisions of part 36(8) and (12) of the Structure of the Federal Republic of Nigeria, 1999 (As amended) prohibit prosecution for an act which doesn’t represent an offence on the time of such act. In decoding part 36(12) of the Nigerian Structure, the Courtroom of Enchantment held in Ibrahim v Nigerian Military (2015) LPELR- 24596(CA) that:
“The components of part 36(12) of the 1999 Federal Structure as amended (supra) are as follows: “The offence needs to be outlined in a written regulation which time period refers to:- (i) An Act of the Nationwide Meeting;(ii) A Legislation of a State Home of Meeting;(iii) Any subsidiary laws; or (iv) Instrument below the provisions of a regulation. The penalty shall even be prescribed in a written regulation which time period refers to:-(i) An Act of the Nationwide Meeting;(ii) A Legislation of a State; or(iii) Any subsidiary laws; or(iv) Any instrument below the provisions of a regulation.”
Making use of the foregoing parameters to the CBN’s letter, the financial institution must additional clarify to Nigerians whether or not it’s supposed to be a subsidiary laws or it supplies penalty as required by the Structure, making an allowance for the that means of subsidiary laws and the choice of the Supreme Courtroom’s resolution in Comptroller Basic of Customs v Gusau (2017) LPELR – 42081 (SC) to the impact that, tips will not be subsidiary laws, therefore there exists no regulation creating an offence (of dealing in cryptocurrencies) upon which the police can lawfully arrest anybody in Nigeria.
Conclusively, with out prejudice to the (proper or flawed) financial and socio-political sentiments, whipped up by the CBN of their Press Launch of February 7, 2021 justifying the prohibition, it stays this author’s respectful opinion that the apex financial institution overstepped its regulatory boundaries by usurping the statutory powers of the Safety and Alternate Fee to manage securities within the mould of cryptocurrencies.
- Babalola is a Lagos-based digital rights lawyer.