All should know about SEC’s new rules for crypto investment in Nigeria

Over the years, Nigeria has emerged as a global leader in cryptocurrency adoption, driven by a tech-savvy youth population, economic challenges like inflation, and the depreciation of the naira. However, the regulatory landscape for digital assets has been evolving.

The Nigerian Securities and Exchange Commission (SEC) has now taken a significant step toward clarifying the Investment and Securities Act 2024 by introducing a new act, signed by President Bola Tinubu, on March 29, 2025.

This new legislation replaces the outdated 2007 Act and introduces a comprehensive framework for regulating cryptocurrency investments in Nigeria to balance innovation with investor protection.

Under the 2024 Act, virtual and digital assets, broadly encompassing cryptocurrencies like Bitcoin and Ethereum, are explicitly classified as securities unless proven otherwise.

This classification aligns with the SEC’s long-standing position, first noted in its 2020 statement on digital assets, that crypto assets fall under its jurisdiction when they exhibit characteristics of securities, such as being investment vehicles with profit expectations.

The burden of proof remains on issuers or sponsors to demonstrate that their crypto offerings do not qualify as securities, a process that involves an initial assessment filing with the commission. If deemed securities, these assets must be registered, bringing them under the commission’s regulatory oversight.

The Act also brings Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges under the commission’s purview. VASPs include entities involved in activities like crypto trading, custody, portfolio management, and investment advice.

SEC mandates compulsory registration from exchanges

This means that platforms facilitating cryptocurrency transactions, whether local startups like Quidax and Busha or international giants like Finance and Bybit, must now obtain licenses from the commission to operate legally in Nigeria.

The licensing process requires a minimum paid-up capital of 500 million naira (approximately $300,000) and compliance with stringent Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) protocols.

Additionally, the updated Digital Asset Rules, revised in December 2024 and set to take effect on June 30, 2025, mandate that VASPs and even crypto influencers obtain prior approval for marketing promotions, ensuring transparency in advertising.

This regulatory shift follows a protracted history. In 2021, the Central Bank of Nigeria (CBN) banned banks from facilitating crypto transactions, citing risks like money laundering and currency manipulation.

Despite this, Nigerians continued trading via peer-to-peer (P2P) platforms, with volumes soaring, Paxful reported over $400 million in Bitcoin trades in Nigeria in 2022. The CBN lifted its ban in December 2023, signaling a relaxed stand, but concerns persisted about unregulated P2P trading on the naira.

SEC’s 2024 Act addresses these gaps by formalizing crypto’s legal status and requiring exchanges to delist the naira from P2P platforms to curb manipulation, a move reinforced by earlier enforcement actions against Binance in 2024.

For investors, the new rules promise greater protection. Licensed exchanges must maintain robust security measures, appoint chief information security officers, and provide accessible records to the commission.

The commission has also approved two exchanges, Quidax and Busha, under its Accelerated Regulatory Incubation Program (ARIP) in August 2024, with more approvals pending. However, the regulations impose burdens: high entry costs and compliance requirements could stifle smaller players, while the SEC’s crackdown on unlicensed operators, announced in September 2024, may limit options for retail investors accustomed to informal platforms.

The 2024 Act reflects Nigeria’s attempt to harness crypto’s economic potential, evident in its ranking among the top countries in Chainalysis’ Global Crypto Adoption Index, while mitigating risks. By integrating digital assets into its capital market, the Nigerian government aims to foster innovation, attract investment, and position Nigeria as a fintech leader in Africa.

Yet, its success hinges on harmonising policies with the CBN and ensuring regulations do not necessarily choke the very growth they seek to nurture.