The Nigerian Government is once again reiterating its determination to regulate FinTechs and their products.
Speaking at a lecture in Abuja, Acting Director of the Securities and Exchange Commission (SEC), Mary Uduk, shared that regulating FinTechs is a good thing. Regulating these startups and their products is to help transition the country into a technology-driven country, she said.
“We are very much interested in some of the most active areas of FinTech innovation like blockchain technology, cryptocurrencies and how they affect investors.”
“Very soon, the whole world will move to technology for regulation,” she said. “Other jurisdictions have already gone far into it with some of them already amending their rules in that direction.”
The net-benefit will increase investor confidence and protect investors in the capital market.
Still No Direction on FinTech Regulation
There’s still no information about how she plans to regulate the startups. In fact, she sounded rather cautious about what actions will be taken. She emphasized the need for regulators to understand more about FinTechs before they take action.
“If we will regulate this market and understand what is happening, we need our staff to understand the rudiments of FinTec”, she said.
But she was quick to advise the country to move quickly and not be left out. She revealed that the “International Organisation of Securities Commissions is on it and there is a lot on it already all over the world.”
Talk of Regulation Not New
This is not the first time a high ranking government official has spoken out about regulating FinTechs. Since January last year, the CBN intermittently brought up the idea.
FinTech in Nigeria is 🔥🔥🔥🔥. Lets be grounded that we are still in Nigeria aka 'upside down Wakanda'. In case we forget N11Bn fraud using @eTranzactPLC platform, €200k Fraud at @NairaBET and countless others. Its like fraud is in our peoples DNA. 419 is the tip of the spear
— JasonNjoku (@JasonNjoku) May 24, 2018
A few months ago, during an interview with Bloomberg, the CBN Governor, Godwin Emefiele shared his concerns about cryptocurrencies. He called them a “gamble” and shared that a decision to regulate the product would be announced “soon”. It’s been a month since, yet no announcement has been made.
Also, in July, the CBN shared it was working on a draft with measures on regulating FinTech companies. According to Mr. Dipo Fatokun, Director at CBN’s Banking and Payments System Department, this would not kill FinTech innovation. Rather, it aims to increase collaboration in the finance sector.
However, nothing is yet to happen.
What Happens if FinTechs are Regulated?
Now, the Nigerian Government has been lax, uninformed, and uncoordinated about FinTechs, generally.
In recent times, the Vice President has been paying visits to tech hubs across the country and guaranteeing their portfolio startups of Government’s support. Yet, the CBN and other regulatory bodies are scheming (or not) about several measures that could affect these companies.
For instance, FinTechs have long enjoyed the relatively free direct access to consumer markets. Unlike traditional banks and other financial institutions, FinTechs are not restricted by (many) regulatory laws.
A company can develop a product, get investors and push its products onto the marketplace. This has helped to so far simplify the payments space. Fintechs involved in payments processing only have to worry about a few licenses and nothing more.
Whereas any proposed government regulation would invariably limit this quick access to the market. Of course, it would make it harder for dubious products to launch. But at the same time, it could drastically limit the pace of innovation in the largely conservative finance sector.
Some old MFBs in Nigeria are acting like the Mafia loan sharks. This is the only time that I will advocate for active regulation. These people are the problem and NOT “fintech” companies trying to get MFB licenses to survive the stranglehold of commercial banks.
— Victor Asemota (@asemota) July 20, 2018
As said above, the various Nigerian regulatory bodies have no qualms with FinTechs. Neither are they looking to cripple their innovations and growth.
However, only coordinated and widely consulted regulations should be placed on FinTech companies. This would keep the sector robust and secure, going forward.
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