Crypto: Nigeria is ready for business, says SEC Director-General

by Sylvester Iyere

As reported earlier, Nigeria made a groundbreaking move by officially recognizing virtual assets and investment contracts as securities with the signing of the Investment and Securities Act (ISA) 2024 by President Bola Tinubu. This significant development comes after years of uncertainty and tension between the government and the crypto community.

Will the new ISA boost confidence in the virtual assets industry and stimulate investments in the country? How are industry stakeholders reacting to the new legislation, and what are the expectations?

Is Nigeria now ready for business?

Background of the Legislation

The journey to this point began in February 2021 when the Central Bank of Nigeria (CBN) prohibited financial institutions from facilitating cryptocurrency-related transactions due to concerns over money laundering, terrorism financing, and consumer protection. However, this move sparked widespread outrage, particularly among Nigeria’s tech-savvy youth, who had turned to cryptocurrencies as a store of value amid economic instability.

Despite the ban, Nigeria emerged as Africa’s largest cryptocurrency market by volume, with citizens finding ways to bypass restrictions through peer-to-peer (P2P) trading. The government’s reconsideration of its stance, in response to persistent demand and growing global acceptance of digital assets, led to the lifting of the ban by the CBN in December 2023.

With the enactment of ISA this month, virtual assets are now recognized as securities by legislation.

Interestingly though, in the Securities and Exchange Commission’s (SEC) earlier statement in September 2020, the SEC did not treat and classify all virtual assets as securities. In that statement, the SEC classified virtual assets into Crypto Assets (e.g non-fiat virtual currency), Utility Tokens or “Non-Security Tokens” (e.g., virtual tokens that simply provide users with a product and/or service), Security Tokens (e.g., virtual tokens that have the features and characteristics of a security, with functions analogous to equities, bonds, etc.), and Derivatives and Collective Investment Funds of Crypto Assets, Security Tokens, and Utility Tokens.

According to the SEC in that statement, Crypto Assets are to be treated as commodities if traded on a recognized investment exchange and/or issued as an investment, while Utility Tokens or “Non-Security Tokens” are also be to be treated as commodities except that “spot trading and transactions in Utility Tokens do not fall under SEC purview unless conducted on a Recognized Investment Exchange”. Both Security Tokens and Derivatives and Collective Investment Funds of Crypto Assets, Security Tokens, and Utility Tokens fall under SEC’s regulatory purview and require registration with the SEC. Noticeably, the new ISA did not provide for these exceptions and nuances. Therefore, it is left to be seen how the SEC will interpret the law and its rules on VASPs who either offer Crypto Assets or Utility Tokens, or both.

Key Provisions of the New Law

Some major provisions of the ISA 2024 are as follows:

Enhanced Regulatory Powers: The Act strengthens the SEC’s regulatory powers, comparable to global securities regulators.

Expanded Definition of Securities: The Act recognizes virtual assets and investment contracts as securities, bringing VASPs, digital asset offering platforms (DAOPs), digital asset custodians (DACs), and digital asset exchanges (DAXs) under SEC’s regulatory purview.

Classification of Exchanges: The Act categorizes exchanges into Composite and Non-composite Exchanges and introduces provisions for Financial Market Infrastructures.

Expanded Issuer Categories: The Act expands issuer categories, allowing for innovative products and offerings.
Enforcement against Ponzi Schemes: The Act prohibits Ponzi Schemes and prescribes stringent penalties.

Commodities Exchanges: The Act provides a legal framework for regulating Commodities Exchanges and Warehouse Receipts.

Sub-Nationals’ Fundraising: The Act allows Sub-Nationals greater flexibility in raising funds from the capital market.

Insolvency Provisions: The Act exempts Financial Market Infrastructures from general insolvency laws.

Strengthening the Tribunal: The Act enhances the Investments and Securities Tribunal’s ability to discharge its mandate.

Specifically, regarding the expanded definition of “securities” and “investment contracts”, virtual assets are now included. This development marks a significant shift in Nigeria’s approach to cryptocurrency regulation, providing a clearer framework for the industry to operate within.

The Director-General of the SEC, Dr. Emomotimi Agama, as reported by Deji Bademosi, CGTN, Lagos, Nigeria, says that digital assets have come to stay in the country, encouraging virtual asset service providers (VASPs) to do business in Nigeria following the legal backing that digital assets now enjoy in the country.

“The legal recognition is very, very important. It puts us at an edge over a lot of jurisdictions, noting clearly that digital assets have come to stay. And so, it is very important that any jurisdiction that wants to play [in the sector] must have some legal backing around it—More so, for Nigeria where the population of youth in this country is heavily involved in it.”

“So, it becomes of utmost importance that some clarity is provided. Beyond clarity, some legal backing, and the need to be more specific brought about the inclusion of cryptocurrencies and all other digital assets under the full glare of the SEC by its satisfaction in the Investment and Securities Act of 2025.”

With the new legislation, it is generally expected that both local and foreign investors will now expect improved transparency and accountability from operators.

“AML/CFT is very critical to us and if you will know that the AML/CFT issue is what brought about our inclusion in the grey list. The inclusion of this law on digital assets into our law now provides us an avenue to exit that Grey list, and that is very critical to the international community.”

“We are telling the international community that we are ready for business and we are ready to protect every business that operates within Nigeria and all those involved in such activities within Nigeria.”

It’s a confidence booster for operators, investors, and portfolio managers, say industry stakeholders, analysts, and broker

Industry stakeholders welcome the legislative recognition of virtual assets in Nigeria’s capital market with the new Investments and Securities Act (ISA).

Lucky Uwakwe, Chairman of the Blockchain Industry Coordinating Committee of Nigeria (BICCoN), is excited about the development. In his words to CAB, Uwakwe stated, “I am excited about the ISA and it signals growth for Nigeria in the direction of security and digital assets. The President Bola Tinubu administration’s move shows that Nigeria is progressing on the path of making Nigeria a hub for crypto companies. With the new Act, the foundation for running their businesses is now legal in the capital market.”

Also, Uwakwe expects that the new Act is the beginning of a friendlier business climate for VASPs in the country. “The days of crypto companies and businesses running from commercial banks, and the days when one is redirected to the Central Bank of Nigeria and sometimes redirected again to the Securities and Exchange Commission over who the regulator is, and then face police harassments due to crypto trading is over”, stated Uwakwe. “What this ISA has done is provide clarity on who is in charge, and consequently, the days of regulatory rascality and dis-coordination are over.”

Rume Ophi, a leading crypto analyst, welcomes the initiative, emphasizing the positive impact the legislation would have regarding the prevention and prohibition of fraud and scams in the virtual asset industry. “It is indeed a welcome development seeing cryptocurrency recognized by law. More importantly the SEC now has power to enforce these laws. In the past, we have witnessed ponzi schemes of all kinds and also bad actors in their number taking undue advantage of newbies. All of that will be reduced because the implications and consequences are now clear”, he said.

Kalu Aja, Financial Analyst, welcomes the move, “In the past, they have been approved, disapproved, banned from the banks. But I think with the Securities and Exchange Commission saying that, listen, we have you now in our act, that you are surely safe, does give them that stamp of authority and authentication, which is going to be like a big, big, big plus for them, because they have been trying to [go] mainstream, more or less, and this is very good for them at the moment.”

Bosun Babatunde, Senior Broker, Forte Financial Limited, believes that the statutory recognition of virtual assets as securities, just like stocks, will enlarge Nigeria’s capital market and bring about new investors. In his words, “Especially with the inclusion of crypto assets in the market, they are more diversified products in the market. Like the young minds, they may prefer the crypto asset, while the old ones may prefer equity or other markets.” Babatunde welcomes inclusiveness in the capital market and looks forward to operators offering diversified portfolios to investors. “It will enlarge the base of the investor”, he enthused.

Gabriel Eze, Lead Associate at Infusion Lawyers, believes that recognizing virtual assets as securities in Nigeria provides—for the first time—distinctive regulatory clarity and a legislative backing for the VASPs sector in Nigeria. Eze sees this distinctive regulatory clarity in two senses. “First, an end to regulatory dissonance in Nigeria. By recognizing virtual assets as securities, the ISA has, as I believe, put an end to regulatory dissonance of conflicting policies that has plagued the VASP industry in Nigeria over the years. Particularly between relevant regulatory bodies such as the CBN and the SEC.”

Apart from ending the apparent regulatory dissonance over the years in the country, Eze also expects the new legislation “will bring an end to overlapping regulatory roles and treatment of virtual assets in the country”. Eze stated that “By recognizing virtual assets as securities, the ISA has finely delineated the powers and functions of the SEC. Consequently, imparting on how the SEC sees virtual assets, in terms of classification, and how it would treat them going forward. Impliedly, it may then mean that other regulatory bodies such as the CBN and the Federal Inland Revenue Service (FIRS) may consider treating virtual assets as payments (fiat-backed stablecoins for example) and as taxable assets respectively for the purpose of promoting sound financial system and effective taxation respectively.”

“In conclusion, the singing of the ISA is a shift from skepticism to structured engagement—offering a foundation for investor protection, market integrity, and innovation. However, implementation will be key. In enforcing compliance, there must be a balance between fostering innovation and stringent requirements that could stifle growth or ground progress.”

Mixed Feelings

However, there are also mixed feelings about the new development, bordering on possible stifling of innovation and access to the market by local startups in the emerging virtual assets industry in the country.

A Nigerian crypto enthusiast speaking to FORBES AFRICA, Samuel Adebayo, believes that while legislation would “likely accelerate institutional adoption of digital assets in Nigeria by providing legal clarity and investor protection … stricter compliance requirements may pose challenges for smaller crypto startups.” In the attempt to enhance market legitimacy, it is important that “regulations are enforced and adapted to industry needs” due to their impact on innovation.

On his part, the BICCoN leader who coordinates blockchain bodies in Nigeria, Uwakwe, appeals to the SEC to help ensure that Nigeria authorities unblock the websites of VASPs who were blacklisted over a year ago. According to Uwakwe, “To show that Nigeria is really open for business, I will also encourage the SEC to help ensure all crypto websites that were blacklisted in Nigeria should be open for all. President Tinubu’s assent of the ISA should be considered superior to the previous order of blacklisting crypto websites. I encourage the SEC to ensure that players get the needed support to fully maximize the new ISA potential and trap value for local players and foreign players as well.”

Meanwhile, SEC Nigeria has emphasized that it is collaborating with relevant regulators and agencies, including the CBN and the Economic and Financial Crimes Commission, to ensure safe adoption of virtual assets in Nigeria. The SEC Nigeria boss has strongly encouraged VASPs operating in the Nigerian market to register with the SEC, otherwise they would face severe penalties for violations. “This is very, very critical. When there is no law, then there is no violation. When there is law, there is violation. As a regulator, the SEC is poised to take regulation to the next level, providing comfort for both the investors and the investors,” says Dr. Agama.

Conclusion

The enactment of the new ISA which, for the first time, gives legislative backing to virtual assets as securities in Nigeria, is a welcome development. This will no doubt boost the legality and legitimacy of virtual assets in Nigeria, especially its adoption in Nigeria’s capital market which needs a spark.

For consistency with existing laws and regulations however, VASPs will expect that the SEC will implement the provisions of the ISA in a manner that is consistent with its statement in 2020. This is in order to prevent a scenario where all virtual assets, irrespective of their specific use cases, fall under the SEC’s regulatory purview. For example, a VASP that enables the use of virtual assets for local payments, cross-border transactions, or remittances should not be expected to require a SEC license to operate in Nigeria. Such VASPs could be issued exemption letters or may be required to approach the CBN for a payment or remittance license, or partner with traditional operators who already do.

Notably, in the United States jurisdiction, the U.S SEC recently took the position that not all stablecoins are securities. These are the kind of nuances in interpretation that operators will expect from Nigeria’s SEC so that regulations do not stifle innovation. Such developmental approach is vital, especially in a developing country as Nigeria, where we badly need emerging innovations to open new window of opportunities for economic prosperity for all.

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