Digital assets, such as cryptocurrencies and tokenized securities, play an increasingly important role in the global financial landscape. In an interconnected world, these assets lower capital market entry barriers through fractional ownership and broader access, enabling wider investor participation. In recent years, Nigeria has seen an increase in the adoption of digital assets such as cryptocurrency. This was mostly driven by currency fluctuations and the attendant search and adoption of alternative financial investment solutions by the country’s young population.

Although, there were initial concerns bordering on the use of digital assets, Nigerian regulators have in recent times begun to take steps to provide a framework to oversee the regulation of these assets. The recognition of virtual assets and digital assets as securities under the Investment and Securities Act (ISA) 2025 marks a pivotal moment in financial evolution in Nigeria. In this newsletter, we examine the previously existing policies on digital assets in Nigeria, the changes that have been introduced and their potential impact on growing the digital assets economy in Nigeria.

From Restriction to Regulatory Reform

On the 5th of February 2021, the Central Bank of Nigeria (“CBN”) issued a circular to all deposit money banks, non-bank financial and other financial institutions directing them to identify persons and/or entities transacting in or operating cryptocurrency exchanges and ensure such accounts are closed. The CBN cited, among other concerns, money laundering, the risk of terrorism financing associated with dealing with such virtual assets and the directive effectively amounted to a ban on cryptocurrency transactions in the formal banking sector. The circular was met with widespread criticism, particularly given Nigeria’s status as one of the world’s leading markets for cryptocurrency adoption.

This policy position began to shift gradually with the issuance of the New Rules on Issuance, Offering, and Custody of Digital Assets in 2022 by the Securities and Exchange Commission (“SEC”), to regulate digital and virtual assets, including cryptocurrencies. Additionally, a revised Money Laundering (Prevention and Prohibition) Act 2022 was subsequently passed and, in its definition of “financial institutions,” it recognised Virtual Asset Service Providers (VASPs). The CBN also revised its position in a later circular issued on the 22nd of December 2023. The Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers acknowledged the need to regulate the activities of virtual assets service providers and provided extensive guidelines on the operation of bank accounts held by VASPs, risk management and consumer protection measures, rather than focusing on an outright ban.

Regulation of Virtual Assets

These developments in Nigeria mirror global trends. In January 2024, the United States Securities and Exchange Commission approved 11 spot Bitcoin ETFs with major funds like BlackRock’s iShares Bitcoin Trust rapidly attracted billions in assets. With global interest pouring in from asset managers, asset owners, family offices, private banks, hedge funds and VC firms, it has become increasingly evident that the global financial economy is embracing the innovation of digital assets, and they are now part of the mainstream financial landscape. These shifts have prompted countries around the world to introduce regulatory changes to adapt the financial system to a growing demand for niche instruments and securities such as digital assets.

As mentioned earlier, the SEC had previously introduced the New Rules on Issuance, Offering, and Custody of Digital Assets (the “Digital Assets Rules”) regulating the activities of all issuers seeking to raise capital in the Nigerian capital market through digital asset offerings. Virtual assets are defined as a “digital representation of value that can be transferred, digitally traded and can be used for payment or investment purposes, not including digital representations of fiat currencies, securities and other financial assets.” Digital Assets, on the other hand are defined as a digital token that represents assets such as a debt or equity claim on the issuer. These definitions recognise the legality of the use of virtual assets (such as cryptocurrencies) in exchanging value and the use of digital assets in a manner akin to traditional debt and equity securities such as shares and bonds.

The Digital Assets Rules provided key investor protection mechanisms to the digital asset space, mirroring standards in the traditional securities market. The SEC is empowered to register and license VASPs, including exchanges, custodians, wallet providers, and token issuers; issue guidelines for the issuance, offering, and marketing of digital assets; monitor market activities and enforce compliance through inspections, penalties, and suspension powers. The Digital Assets Rules also introduced: mandatory disclosures by digital asset issuers to ensure transparency; Know Your Customer (KYC) and AML/CFT compliance obligations for VASPs; consumer redress frameworks for disputes involving digital assets, registration requirements for offering digital assets, and investment limits for retail investors. VASPs are also required to provide evidence of the required minimum paid up capital of N500,000,000 (five hundred million Naira) and a current fidelity bond covering at least 25% of the minimum paid-up capital.
In addition to the Digital Assets Rules, the Investments and Securities Act 2025 which was just passed into law in Nigeria provides statutory recognition of virtual assets as securities and an investment class under Nigerian law. Section 357 of ISA 2025 defines “securities” to mean:
(a) debentures, stocks or bonds issued by a government;

(b) debentures, stocks, shares, bonds, notes issued by a body corporate, any right or option in respect of any such debentures, stocks, shares, bonds or notes;

(c) virtual assets;

(d) investment contracts;

(e) commodities, futures, contracts, options and other derivatives; or

(f) any other instrument deemed as securities which may be transferred by means of any electronic mode or which may be deposited, kept or stored with any depository or custodian.

Section 357 of the Act further defines a securities exchange to mean “an organized facility which maintains and provides an infrastructure –
(a) for bringing together buyers and sellers of securities, virtual assets, commodities, or financial products or instruments;

(b) for matching bids and offers for securities, virtual assets, commodities, or financial products or instruments of multiple buyers and sellers; and

(c) whereby a matched bid and offer for securities, virtual assets, commodities or financial products or instruments constitutes a transaction.
The Act empowers the SEC to register and regulate all securities including digital and virtual assets and to also register and regulate all securities exchanges, virtual and digital exchanges. These provisions are critical for attracting institutional investment and promoting market development. By recognizing and regulating virtual assets, the Digital Assets Rules and the ISA 2025 facilitates the adoption of newer models of capital raising, such as Initial Coin Offerings (ICOs), Security Token Offerings (STOs) and tokenized investment products.

Conclusion

The provisions of the Digital Assets Rules and ISA 2025 reflects a broader shift in regulatory philosophy, from reactive prohibition to proactive regulation and oversight. Nigeria’s new laws on virtual assets are a positive step toward bringing more structure and legal recognition to digital and virtual assets and represent a willingness to regulate and support the adoption of digital and virtual assets. These reforms also provide a foundation for regulatory oversight and investor protection by the Securities and Exchange Commission in a rapidly growing sector.

However, while the introduction of legislation signals progress, there may still be concerns about certain contradictions in Nigeria’s regulatory environment. The ongoing enforcement against cryptocurrency exchanges, concerns raised by the CBN about currency speculation using cryptocurrency exchanges, and the tax treatment of digital assets will likely be a note of caution for investors. It is hoped that with developing regulatory clarity on the adoption of digital assets in Nigeria, further reforms and amendments to the legal framework and collaboration among regulators such as the CBN and the SEC, there will emerge a structured framework that aligns with global trends and opens opportunities for investment and growth in Nigeria’s capital market.