Dlriven by the burning desire to deepen the capital market while guarante ing the protection of investors, the Securities and Exchange Commission (“the SEC”) recently announced that two Digital Assets Exchanges were granted “Approval-in-Principle” to commence operation under the Accelerated Regulatory Incubation Programme (ARIP).

The capital market regulator also admitted five firms to test their models and technology under the SEC’s Regulatory Incubation (RI) Programme earlier introduced by the Commission to strategically onboard firms, which had commenced operations prior to the release of the Rules on Virtual Asset Service Providers in May 2022.

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 SEC’s close supervision.

But the question on the lips of equities market observers has been “how prepared are the market operators?” Do local firms have the resources, especially the capacity and technology to operate crypto assets trading?

An interview with some of the market operators, who are exceptionally knowledgeable about the market, revealed that the market was quite prepared for trading in the new asset classes.

In fact, some stockbrokers were already trading crypto assets ahead of the regulator’s announcement by end of August.

Apprehension

However, some of the brokers, who spoke to New Telegraph, said the only challenge was the provision of necessary infrastructures, which must be put in place for increased trading activities in the crypto space.

While commending SEC for providing capacity building so far, as well as Central Bank of Nigeria (CBN) for supporting the crypto trade, the operators are of the opinion that more needs to be done to ensure a safe and efficient crypto trading environment.

The market operators are quite convinced that crypto trading will not only deepen the market but also bolster government’s revenue, and improve the country’s growth in terms of gross domestic product (GDP).

Stockbrokers’ preparedness Mr. Charles

Fakrogha, the Chief Operating Officer, Supra Commeercial Trust Ltd, told New Telegraph that Nigerian firms had the capacity and potential to operate in this sector.

He also stressed that SEC had all it takes to regulate the market, and has done quite a lot in terms of capacity building in crypto block chain. He said: “I have attended quite a lot of trainings in capacity building in this area. I am telling you authoritatively, SEC has the capacity to regulate in this crypto space.

Some of us operators also have the capacity to trade in this crypto. Even local non traders, young boys, are also equipped now to trade it on their own. “Because SEC is always ahead of the market, they have come to realise that there is no way we can wait again.

This is the time to trade that asset. I am telling you, SEC has the capacity to regulate it, and we operators have the capacity to trade it because we have seen it, all the structures have been put in place. Yes, Nigeria is good to go when it comes to crypto currency trading.”

Infrastructure

On the extent of infrastructure on ground, he said: “With the capital market infrastructure for the basic equities trading we do every day, it is a question of tweaking some of the applications and at the same time ensure that you are putting in place risk mitigation technology.

There is nothing like rocket science about it. The infrastructure is in place, it has been tested. We have seen it. It is just to create more awareness, build more capacity, and we are good to go.”

According to him, some persons have already started trading it. Consequently, regulators had no choice but to start to licence it so that they can begin to regulate the market. “Some operators have gone ahead, that is why regulators, coming to realize it said well we don’t have a choice.

Let’s see how we will regulate them so that we can have efficient and transparent market in that space,” he added. Speaking in the same vein, Mr. David Adonre said that some dealing member firms and their stockbrokers could not wait to see the launch, stressing that the market is in high spirits waiting to welcome the launch as quickly as possible.

According to the stockbrokers, the market has been ready for crypto trading long ago. But it is just that SEC has been trying to put regulation in place

The infrastructure has to be ready before SEC and other regulators will be convinced that you are ready for it

before they can make it public. “Long ago, I know that the capacity has been there. I have attended several capacity building programmes. Most of these capacity building programs are open to stockbrokers, investment bankers, etc.

As at the time I attended the last one in March, April to May, a reasonable number of stockbrokers were in that training. At some point, I became a facilitator in those trainings. I am aware that we have a reasonable number of our colleagues who are ready for crypto assets trading,” said Mr. Adonre.

Also speaking, Dr. Akeem Oyewale, the Managing Director and Chief Executive Officer (MD/CEO), Marble Capital Ltd, confirmed that a lot of capacity and conversation are going on within the stockbroking community regarding trading of crypto assets.

He explained that capital market operators were watching and prepared for enhancements in capacity and knowledge to be able to handle crypto assets, if and when SEC finally grant final licence for the trading in Nigeria.

He stressed that stockbroking community was waiting for the SEC to get guidance on the kind of licence they want to issue, and how it is going to operate.

Expectations on GDP

Fakrogha said it was going to deepen Nigeria’s financial market which invariably will deepen the GDP, especially improve the economy.

According to him, it provides an alternative assets class which investors will have the opportunity to invest in depending on their risk profile. It is something that gives investors opportunity for more asset classes outside equities, fixed income, and real estate.

Investors will be able to invest in cryptos, another alternative asset class approved by the SEC. It enhances diversification. That is the first benefit that investors will have: diversification based on their risk profile.

It is a good development; it is virtually accepted but there will be a lot of clarifications and guidance provided by the regulators on how it should be treated on accounting perspective; how it should be recognized and how it should be traded.

On risks and challenges

For any new product or assets that come to the market for trading there are benefits and there are also down side. Nevertheless, operators said that crypto assets trading is going to offer investors a lot of options and god prospects for wealth creation.

However, they said that the trade is fraught with risk of loss, and therefore warn that risk averse investors had better steer clear. “Crypto assets trading and investment is not an all-comers af – fair.

So, for those investors who have appetite for that kind of risk, we advise them to go ahead. But for those who don’t have that kind of risk, I advise them to stick to their equities or fixed income products.

So, it is a dawn of array of investment products where investors can chose based on the advice of their stockers or any investment advisors for them to go into.

“That is why SEC is encouraging operators like us that before we start to trade on these assets, we must put in place risk mitigation infrastructure. We have to show the regulators our robust enterprise risk management.

They will come and inspect before they give certification for operators to trade on it. That work is ongoing and it is always regular. After they give certification, may return in six months to ensure that trades are going on properly with your infrastructure.

“It is not only trading. There is also the settlement part and delivery. So, it has to be a fair and transparent market,” Fakrogha said. On the challenges, he said:

“Operators are ready, but the challenge is getting some of the stockbrokers put in place the infrastructures. The infrastructure has to be ready before SEC and other regulators will be convinced that you are ready for it.”

Please follow and like us: