Nigeria Officially Classifies Cryptocurrencies as Securities in Landmark Legal Reform

For the first time, Nigeria’s capital market laws now formally recognize cryptocurrencies and other virtual assets as securities, a move set to enhance transparency and attract greater investment.

President Bola Tinubu recently signed the Investments and Securities Act (ISA) 2024 into law, repealing the Investments and Securities Act No. 29 of 2007.

The new legislation explicitly classifies virtual/digital assets and investment contracts as securities, bringing Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges under the regulatory oversight of the Securities and Exchange Commission (SEC).

This means businesses dealing in digital assets must now register with the SEC and adhere to its guidelines—an essential step in curbing fraudulent activities while fostering trust and innovation in Nigeria’s blockchain ecosystem.

Emomotimi Agama, Director-General of the SEC, hailed this as a transformative development for the capital market, emphasizing that the new law will significantly boost investments in digital assets.

Nigeria’s initial reaction to the rise of cryptocurrencies, which gained traction around 2015 following a sharp decline in oil prices and the subsequent depreciation of the naira, was marked by caution and restrictions. However, this landmark shift signals a new era of regulatory clarity and industry growth.

As Bitcoin and other cryptocurrencies became a financial refuge for many Nigerians, the country rapidly rose to become the world’s second-largest holder of cryptocurrencies—trailing only the United States.

However, the growing demand for digital currencies put immense pressure on the naira’s exchange rate. In response, the Central Bank of Nigeria (CBN) moved to suppress cryptocurrency trading by ordering banks to close all accounts linked to crypto transactions.

Undeterred, traders turned to underground operations, relying on peer-to-peer (P2P) exchanges to sustain their activities. Major global platforms like Binance quickly adapted, introducing P2P services tailored for Nigerian users.

A shift began when President Bola Tinubu took office in mid-2023 and appointed Olayemi Cardoso as CBN Governor. The new administration signaled a more open stance on digital assets, suggesting a possible regulatory pivot.

Emomotimi Agama, Director-General of the Securities and Exchange Commission (SEC), hailed the Investments and Securities Act (ISA) 2024 as a landmark achievement, stating:

“The ISA 2024 reflects our commitment to building a dynamic, inclusive, and resilient capital market. By addressing regulatory gaps and introducing forward-looking provisions, the new Act empowers the SEC to foster innovation, protect investors more efficiently, and reposition Nigeria as a competitive destination for both local and foreign investments.”

Agama also acknowledged the contributions of stakeholders in shaping this milestone, calling for continued collaboration to ensure the effective implementation of the law.

Industry Leaders Welcome the Reform

Oluropo Dada, 13th President and Chairman of the Council at the Chartered Institute of Stockbrokers (CIS), praised the Act as a significant step toward advancing Nigeria’s financial markets:

“This Act is a testament to our collective dedication to securing the capital market’s future as a driver of economic development. It introduces comprehensive reforms aimed at modernizing regulations, enhancing investor protection, and strengthening the foundation for sustained economic growth.”

Dada further emphasized that the new law would boost market integrity, enhance investor confidence, and expand investment opportunities for both local and international participants.

With the ISA 2024 now in effect, Nigeria is poised to establish a more transparent and efficient financial ecosystem, fostering innovation while ensuring regulatory clarity in the fast-evolving digital asset space.

Sam Onukwue, Chairman of the Association of Securities Dealing Houses of Nigeria (ASHON), described the Investments and Securities Act (ISA) 2024 as a transformative step toward strengthening regulatory oversight in the capital markets, with a core focus on enhancing investor protection.

“At its core, the ISA 2024 is a game-changer. It will reinforce market regulations, boosting investor confidence and fostering significant growth in the sector,” Onukwue stated.

He further highlighted that the Act opens new diversification opportunities for market operators by expanding investment options beyond traditional equities and fixed income securities.

Eguarekhide Longe, Managing Director of NASD, echoed similar sentiments, emphasizing the importance of the updated regulatory framework in adapting to the evolving digital economy:

“The ISA 2024 is a welcome development. Our market has always prioritized investor protection. As we embrace digital financial products and seek to attract a younger generation of investors, strengthening our regulatory framework is essential.”

With industry leaders expressing optimism, the ISA 2024 is expected to set the stage for a more resilient, dynamic, and inclusive capital market in Nigeria.

Experts Praise Key Provisions of the ISA 2024 as a Major Step for Nigeria’s Capital Market

Akin Akeredolu-Ale, Managing Director of the Lagos Commodities and Futures Exchange (LCFE), commented on the transformative potential of the new Investments and Securities Act (ISA) 2024, saying:

“We now have a growing understanding that the capital market is the economy’s barometer. The enabling environment, especially the legal framework, is essential for the capital market’s growth, and ultimately for the entire economy’s development.”

The new law introduces a significant development by classifying securities exchanges into two categories:

Composite Exchanges: These allow the listing and trading of all types of securities and products.

Non-composite Exchanges: These focus on specific types of securities or products.

Additionally, the Act introduces provisions related to Financial Market Infrastructures, including Central Counterparties, Clearing Houses, and Trade Depositories, helping align Nigeria’s market operations with global best practices.

Strengthening SEC’s Authority

The enactment of the ISA 2024 solidifies the Securities and Exchange Commission (SEC) as the apex regulatory authority in Nigeria’s capital market. The Act expands the SEC’s powers, bringing them in line with leading global securities regulators and ensuring that Nigeria remains in compliance with IOSCO’s Enhanced Multilateral Memorandum of Understanding (EMMoU), securing the SEC’s “Signatory A” status.

Key Provisions of the ISA 2024

Exemption from Insolvency Laws: Transactions involving Financial Market Infrastructures are exempt from general insolvency laws.

Systemic Risk Management: New provisions have been introduced to monitor and manage systemic risk in the market.

Issuance of Securities by Sub-Nationals: The Act allows more flexibility for sub-national entities to raise funds in the capital market, addressing previous restrictions.

Legal Entity Identifiers (LEIs): The Act mandates the use of LEIs by participants in capital market transactions, increasing transparency.

Enforcement Against Illegal Investment Schemes: The Act prohibits Ponzi schemes and other fraudulent investment schemes, imposing strict penalties for promoters.

New Regulations for Commodities Exchanges

The Act also includes a new section to regulate Commodities Exchanges and Warehouse Receipts, fostering the development of the entire commodities ecosystem.

Enhancing the Investments and Securities Tribunal

To further strengthen the legal framework, the Act makes amendments to the Investments and Securities Tribunal, enhancing its capacity to handle cases efficiently and effectively.

With these comprehensive reforms, the ISA 2024 positions Nigeria’s capital market for growth, transparency, and innovation, attracting both local and international investors while safeguarding market integrity.