The difficulty Nigeria faces in regulating Bitcoin
A set of new regulations has been released by the Nigerian Securities and Exchange Commission (SEC) to guide the trading of digital assets in an effort to protect investors.
The new regulation classifies digital assets, such as Bitcoin and other crypto assets, as securities regulated by the Securities and Exchange Commission.
A number of pundits were taken aback by this as the SEC’s Jay Clayton had clarified that bitcoin is not a security.
“Historically, cryptocurrencies were used in place of sovereign currencies…they replaced the yen, the dollar, and the euro with bitcoin. A currency of that type is not security,” he told CNBC.
Crypto assets, particularly Bitcoin have become extremely popular in recent years. Bitcoin is a form of storing value and a medium for facilitating transactions. There is no middle man or regulatory body required to approve near-instantaneous transfers throughout the world.
Many Nigerian crypto enthusiasts fear that such regulation will ruin the industry, but they shouldn’t be too concerned. It is highly unlikely that Bitcoin will be controlled in any way.
Governmental and regulatory bodies have demonstrated a lack of knowledge of technological topics, and bitcoin is one of the most complexes. Besides the difficulties presented by Bitcoin’s decentralization, there is also the issue of governments and regulatory bodies’ ignorance of technological topics.
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There is a reason for the oversight jitters. Over the years, there have been some attempts at regulation, and now that bitcoin’s value has risen to unprecedented highs, governments around the world are more interested in taking action than ever before.
- Bitcoin has several key components, which make it practical as a method of transacting and as a store of value. They are easy to transfer, require no middleman, and can’t be linked to owners who don’t want their identity revealed.
- All of these issues are important for any government hoping to have more influence over how it operates.
- No financial institution or territory is associated with Bitcoin. Even if there weren’t any crypto exchanges, all you need to conduct bitcoin transactions is a wallet and an internet connection.
- As a public ledger rather than a private one, the blockchain on which the system is built doesn’t require any one institution to operate it. Any meaningful crackdown would have to be conducted globally without that central location to shut down.
- The use of a VPN or proxy system would enable users to work internationally even if a country were to prevent bitcoin transactions within its borders.
- In a perfect world, governments would have shut down torrent websites over a decade ago if they could stop peer-to-peer networks effectively.
It is difficult to track individual wallet owners. Even though governments or law enforcement may be able to track down certain bitcoins using the public blockchain, it is very difficult to tie them to a real-world person. Wallet owners can hide their identity with VPNs, Tor, or by physically storing their wallets in cold storage (offline), making them inaccessible to the outside world.
The Nigerian Government and regulatory bodies would be wiser and more effective if they teamed up with top stakeholders, users and developers in managing the space more effectively.
