Aladekomo cautions over SEC’s ‘dangerous move’ to license cryptocurrency exchange 

Sir Demola Aladekomo, Founder of CHAMS Plc, has expressed concern over the decision of Securities and Exchange Commission (SEC) to license cryptocurrency exchanges in Nigeria, calling on the capital market regulator to reconsider what he describes as a “dangerous move.”

Aladekomo, who expresses “deep concerns” over the decision of SEC, says that the plans by the government agency mandated to regulate and develop the Nigerian capital market to issue licences to cryptocurrency exchanges in the country is risky, in a statement seen by Technology Times.

SEC had announced this week that two companies, Busha Digital Limited and Quidax Technologies Limited, to operate “digital assets exchange”, are among the seven granted “Approval-in-Principle” to begin operation under the Accelerated Regulatory Incubation Program [“ARIP”].

Aladekomo to SEC: Licensing of cryptocurrency exchanges in Nigeria is risky

Meanwhile, the cards and e-payments pioneer, Aladekomo, who says he feels compelled to raise caution, wants SEC to tread carefully on the cryptocurrency exchange licensing plan because of what he sees as the associated risks.

“While the allure of embracing digital currencies may seem promising, I believe that the risks associated with cryptocurrencies are too significant to ignore, especially given the current state of our economy,” Aladekomo says.

According to him, “cryptocurrencies inherently operate in an environment that lacks the necessary regulatory oversight and transparency. The anonymity they afford makes them a tool for activities that could undermine national security, such as money laundering, fraud, kidnapping and the financing of terrorism. The inability to trace transactions effectively poses a severe threat to the integrity of our financial system, which relies on stringent regulation and accountability to maintain stability.”

Aladekomo is also calling on SEC’s sister agencies like the Central Bank of Nigeria, the banking industry regulator; the Nigerian Financial Intelligence Unit (NFIU), which combats money laundering, terrorism financing and allied financial crimes and the National Security Adviser (NSA) to “reconsider this dangerous move by SEC if the story is true.”

Furthermore, Aladekomo says, “the volatile nature of cryptocurrencies, which are not backed by any tangible assets or regulated monetary systems, introduces a level of unpredictability that our fragile economy cannot afford. The speculative bubbles and abrupt market crashes associated with these digital currencies could have devastating consequences, not only for individual investors but for the broader financial landscape. In a time when Nigeria is facing numerous economic challenges, the introduction of such a volatile and largely unregulated financial instrument could lead to significant disruption, potentially destabilising our already fragile economy.”

The CHAMS’ Founder says his calling urging the nation’s regulators to reconsider the idea of licensing cryptocurrency exchanges is predicated on securing the long-term interests of Nigerians against the short-term gains from cryptos.

“Given these serious concerns, I strongly urge the authorities to reconsider the licensing of cryptocurrency exchanges in Nigeria. The potential for financial instability, coupled with the risks to national security, makes this a step that could lead to consequences far more severe than any short-term benefits. It is crucial that we focus on maintaining the stability and security of our financial system, ensuring that it serves the long-term interests of all Nigerians,” Aladekomo says.

Meanwhile SEC says in its announcement that the issuance of licences to the seven companies under its ARIP scheme would deepen the capital market while guaranteeing the protection of investors. 

The two Digital Assets Exchanges have been granted “Approval-in-Principle” to commence operation under the Accelerated Regulatory Incubation Program [“ARIP”], while the five firms have been admitted to test their models and technology under the SEC’s Regulatory Incubation [“RI”] Programme, according to the capital market regulator.

The Approvals-in-Principle, SEC says, “are a precursor to the grant of full registration by the SEC and are meant to ensure that appropriate protection and transparency is in place in respect of each product or service.”

The regulator adds that it “introduced the ARIP to strategically on-board firms which had commenced operations prior to the release of the Rules on Virtual Asset Service Providers in May 2022. Conversely, the RI Program was created to assess the business models of Digital Assets firms and test innovative products, services and technology in a real-time market environment under close supervision by the SEC.”

Accordingly, “the current cohort of the ARIP and the RI Program is characterized by the increased use of distributed ledger technology [“DLT”] in creating and trading crypto assets The outcome of the process would inform further policy development in this space.  Tests would be conducted on a short-term and small-scale basis and the SEC would continue to work with the participating firms to agree on testing parameters as well as robust consumer safeguards.”

SEC: Participants in the cohort

According to SEC, the cohort comprises of two (2) Digital Asset Exchanges, four (4) Digital asset Offering Platforms and one (1) Digital Asset Custodian as follows: