WHAT THE INVESTMENT AND SECURITIES ACT 2025 MEANS FOR DIGITAL AND VIRTUAL ASSETS IN NIGERIA
1. Introduction
On 29th March, 2025, the President of the Federal Republic of Nigeria, President Bola Ahmed Tinubu, signed the Investment and Securities Act 2025 (the "ISA 2025") into law. The enactment of the ISA 2025, which repealed the Investment and Securities Act 2007 (as amended) ("ISA 2007"), marks a significant milestone in Nigeria's fintech landscape in relation to digital and virtual assets. This comprehensive legislation introduces wide-ranging reforms aimed at, among other things, enhancing investor protection, market transparency, and regulatory oversight within Nigeria's evolving fintech ecosystem.
This article provides a summary of key provisions of the ISA 2025 as they relate to digital and virtual assets, the current legal framework governing such assets, and the way forward for fintech operators in this space.
2. The Current Legal Framework
Prior to the ISA 2025, fintech operators involved in digital and virtual asset services operated within an environment of legal and regulatory uncertainty. Apart from the Finance Act 2023, which amended the Capital Gains Tax Act 2004 (as amended) to impose a 10% tax on gains realised from the disposal of digital assets, there was no substantive legislation specifically recognising and regulating digital or virtual assets prior to the ISA 2025. In addition, there was a debate on whether virtual and digital assets qualify as securities under the ISA 2007 – a debate that was never really settled until the enactment of ISA 2025.
In the absence of legislation, the regulatory approach was largely based on circulars and rules issued by the Securities and Exchange Commission (the "SEC") and the Central Bank of Nigeria (the "CBN").
2.1 The SEC
In 2022, the SEC introduced the Rules on Issuance, Offering Platforms and Custody of Digital Assets (the "Rules"), which sought to establish a legal framework for regulating virtual assets offerings, digital assets offering platforms, digital asset custodians, virtual assets service providers, and digital assets exchanges. The implementation of the Rules has, however, been limited.
To address this, the SEC launched the Accelerated Regulatory Incubation Programme ("ARIP") on 21st June, 2024.
The ARIP Framework created a provisional onboarding mechanism for entities engaged in virtual asset activities. It provided a pathway for such entities to obtain an approval-in-principle pending the operationalisation of the Rules. Qualifying participants under ARIP may transition to full SEC registration upon meeting prescribed compliance and documentation standards. Subsequently, on 16th December, 2024, the SEC released an exposure draft of amended rules on digital assets, scheduled to come into effect by 30th June, 2025.
2.2 The CBN
The CBN, on its part, initially discouraged the use of cryptocurrencies and virtual currencies in Nigeria. It is as a result of this that the CBN issued a circular to prohibit its regulated institutions from (a) dealing in cryptocurrencies; or (b) facilitating payments for cryptocurrency exchanges and their customers. The CBN subsequently relaxed this restriction through its Guidelines on the Operation of Bank Accounts for Virtual Assets Service Providers 2023 (the "Guidelines"). Pursuant to the Guidelines, while the CBN continues to prohibits its regulated institutions from holding, trading and/or transacting in virtual currencies (including virtual assets) on their own account, it permitted such institutions to facilitate the settlement of transactions in virtual and digital assets for their customers subject to complying with the prescribed conditions. This position still remains the same, notwithstanding the enactment of the ISA 2025. The CBN has not given an indication yet whether, following the enactment of the ISA 2025, it will relax some of its existing restrictions, particularly in relation to its regulated entities.
3. Key Changes Introduced by the ISA 2025 Regarding Digital and Virtual Assets
3.1 The most consequential change introduced by the ISA 2025, as it relates to digital and virtual assets, is the recognition of digital and virtual assets as securities. Section 357 of ISA 2025 defines securities to include virtual and digital assets. This classification places digital and virtual assets squarely within the regulatory purview of the SEC and imposes compliance obligations on all market participants dealing in such assets.
3.2 The key implications of the classification of virtual and digital assets as securities include:
(a) Regulatory Oversight: With the formal classification of digital and virtual assets as securities, the SEC has now become the primary regulatory authority over such assets. While collaboration with other relevant agencies may be necessary in issuing and implementing regulations relating to this class of assets, the SEC remains the lead regulator for digital and virtual asset services in Nigeria and has
the responsibility to register and supervise entities operating as digital and virtual asset services providers.
(b) Registration Requirements: Entities engaging in digital and virtual asset-related services must now register with the SEC in accordance pursuant to the ISA 2025 and its implementing regulations. Such entities must obtain a certificate of registration from the SEC to lawfully operate (and target customers resident) in Nigeria.
(c) Issuance and Transfer: Digital and virtual assets may now only be issued, transferred, sold, or offered to the public upon prior registration of such assets with the SEC. This has, thereby, aligned digital asset offerings with the traditional debt and equity securities regulatory framework.
4. The Way Forward
Although the Rules have yet to be fully implemented and the revised version is yet to be issued, there are ongoing efforts by the SEC to harmonise the regulatory framework with the new provisions under the ISA 2025. According to public statements made by the Director General of the SEC at a recent stakeholders engagement session hosted by the Fintech Association of Nigeria, the exposure draft is under review to ensure that its provisions are in alignment with the provisions of the ISA 2025.
Furthermore, the SEC is actively engaging with other regulatory bodies and other stakeholders whose collaboration is required for the effective implementation of the provisions of the ISA 2025 and the applicable rules relating to digital and virtual asset offerings and services. In view of the ongoing changes, the SEC's ARIP portal is currently inactive, while the SEC reviews pending applications that were submitted prior to the enactment of the ISA 2025. The SEC has indicated that once the revised draft rules are finalised and inter-agency engagements concluded, the portal will be reopened for the submission of new applications.
5. Conclusion
The ISA 2025 marks a new era for the regulation of digital and virtual assets in Nigeria. By formally recognising these assets as securities and bringing them under the SEC's registration and regulatory oversight, the ISA 2025 provides much-needed clarity and legal certainty for fintech operators, investors, and market participants dealing with digital and virtual assets. This represents a new dawn for all stakeholders in the digital and virtual asset space in Nigeria.
While implementation remains in progress, digital and virtual asset stakeholders should proactively assess their compliance obligations and prepare for registration and engagement with the SEC under the new regime. The next few months will be critical in shaping how Nigeria's fintech industry adapts to this transformative regulatory shift regarding digital and virtual assets and unlocks the full potential of digital finance. All eyes are, therefore, on the SEC to 'set the ball rolling' and to provide the much desired enabling framework and regulatory regime for all players in the digital and virtual assets space.
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