SEC takes steps toward digital assets regulation

The Securities and Exchange Commission (SEC) has begun efforts toward regulating digital/crypto assets, in order to minimise potential harm to investors.

This was made known by the SEC Director-General, Daniel Ogbamey-Tetteh, at the 2023 Ghana Capital Market Conference commemorating the regulator’s 25th anniversary.

“We are in the era of digital assets – and taking a cue from IOSCO who are encouraging its members to incorporate frameworks in their respective regulations to oversee the activities of digital/crypto assets in order to minimise potential harm to investors, we have commissioned a task force to assist the Commission acquire requisite capacity in that space,” he said.

The SEC has also been taking steps to build on its institutional capacity and give confidence to capital and asset owners about the fairness, transparency, efficiency and resilience of the capital market in Ghana.

To this end, the Director-General said: “We are investing in developing the human capital of SEC as well as implementing a digitalisation programme. We have started implementing a Risk-Based Supervision framework as we seek to migrate from the compliance-based supervision mode”.

He added: “Our pursuit of Reg-Tech and Sup-Tech solutions aims to balance a supportive stance toward financial innovation while upholding the financial market’s integrity and stability”.

Global developments

This development comes as regulators and operators of digital assets continue to tango over regulation, with the decentralised nature of a large chunk of assets proving to be the sticking point despite its growing popularity.

The tension has not been helped by recent ill-developments across the space.

In November 2022, one of the largest digital currency exchange platforms for buying and selling cryptocurrencies – FTX – filed for bankruptcy; and it emerged that the exchange had been hacked, leading to more than US$600million in cryptocurrency disappearing from customer’s wallets.

In addition to shocking corporate governance practices – which have seen it draw parallels to the collapse of Enron – it also emerged that FTX had only US$900million in assets to offset liabilities in excess of US$9billion.

Last month, its founder Sam Bankman-Fried was found guilty of stealing from customers to the tune of US$8billion “out of sheer greed”.

Two weeks ago, Changpeng Zhao – founder and Chief Executive of the largest crypto-exchange in the world, Binance – resigned after pleading guilty to money laundering violations; with the company ordered to pay US$4.3bn in penalties and forfeitures.

This has even seen football icon Cristiano Ronaldo slapped with a US$1billion lawsuit for his promotion of Binance.

Closer to home, VIBRA – the Africa-focused crypto platform founded by Africa Blockchain Labs – shut down its operations in Nigeria, and Kenya.

Nonetheless, it has not all been gloom. On the continent, Namibia’s parliament in June 2023 passed a bill to legalise and establish regulations for virtual assets, including cryptocurrency.

Also, Kenya has taken concrete steps to regulate the space. Last month, parliament asked the Blockchain Association of Kenya (BAK) to prepare the first draft of what might become the Virtual Asset Service Provider’s bill – commonly known as the Crypto bill – in a bid to deepen oversight of its estimated US$20billion crypto market. Already, crypto assets in the country are taxed.

In Nigeria – the largest crypto market in Africa – regulatory measures such as the SEC’s new rules and the Nigerian Finance Act 2023 contributed to a nine percent year-on-year growth in the market size by June 2023. With individuals and businesses involved in digital asset transactions facing a 10 percent tax on earnings, Nigeria now ranks third among six countries sustaining constant growth since 2021, according to a Chainalysis report. Analysts attribute this growth to a flight to safety amid concerns about inflation, exchange rate fluctuations and the convenience of cross-border transfers.

Analysts believe that the market size has been, in part, responsible for the surge in price of Bitcoin from US$16,619.10 at the beginning of January 2023 to US$42,000 in the first week of December 2023 – its highest in 19 months.

Strategic plan

Last week, SEC launched an ambitious 5-year strategic plan to deepen and expand the nation’s capital market substantially. This forms part of the 10-year capital market master plan (CMMP). The comprehensive blueprint lays out 60 initiatives to catalyse transformation. The strategy focuses squarely on engendering greater depth and diversity within Ghana’s capital market landscape while bolstering resilience to external shocks. Pivotal to this agenda are augmenting institutional capacity, embracing next-generation technology, and incorporating sustainable finance principles.

The SEC’s emphasis on sustainability aligns with intensifying global urgency around ethical, accountable investment practices.