What Are the Benefits Of Digital Assets To The Nigerian Economy?

Introduction

The Securities and Exchange Commission (SEC) on the 11th of May 2022 issued guidelines titled “The New Rules on Issuance, Offering Platform and Custody of Digital Assets” (the “Guideline”). This comes after the regulatory body released a statement in September 2020, showing its intention to regulate digital assets which qualify as securities transactions, pursuant to the Investments and Securities Act (ISA) 2007.

What are Digital Assets?

According to the Guideline, digital assets are digital token that represents assets such as a debt or equity claim on the issuer. In simple terms, digital assets can be any content that is stored digitally in any form, which can be owned and transferred by individuals and serve as a currency to complete a transaction.

They could be created from equity, real estate, commodities or any underlying asset, which has the potential to generate future benefits and has ownership rights attached.

Benefits of Digital Assets to the Nigerian Economy

It is without any doubt that digital asset adoption is growing at an exponential rate. The disruption created by the digital asset market can lead to a massive change in Nigeria’s financial landscape. Some of its benefits include:

• Portfolio Diversification: Digital Assets offers investors the opportunity of diversifying their portfolios to mitigate certain factors such as inflation.
• Convenience of Payment Services: It also promotes the convenience of payment services as digital assets would be guaranteed to encourage competition for smooth retail and cross-border payments.
• Transparency: The use of digital assets offers secured and transparent transactions, as they are recorded on transparent public ledgers. It is popularly said that once a digital asset transaction has been initiated it can’t be reversed or tampered with.
• Fast and Efficient Transactions: Digital asset transactions are relatively fast with less uncertainty as to receipt of finds and potentially reduced waiting times.
• Cost Effective Transactions: This is beneficial to individuals or companies that are involved in concluding large transactions monthly. It is important to note that transaction fees can be relatively low when initiating transactions using digital assets.
• Greater Liquidity: Tokenization opens the trading floor to assets that were previously too illiquid to trade, such as non-listed shares. Retail investors enjoy this as it has the benefit of allowing them to gain access to asset classes and risks that may otherwise have been beyond their capacity, for example, participation in private equity funds and real estate industries.