Introduction
Nigeria has continuously experienced a surging adoption of digital assets, with revenues in 2025 projected at over US$1.5 billion.1 Recognising the vast economic opportunities and benefits of digital assets and the attendant risks inherent in these transactions, the Securities and Exchange Commission ("SEC") has continuously sought to develop a balanced regulatory framework that facilitates a fair and efficient market while mitigating risks. The practical outcome of this is a constantly evolving regulatory landscape for digital assets in Nigeria.2 To also address any ambiguity relating to the classification and regulation of digital assets, the recently passed Investment and Securities Act, now clearly classifies digital assets as a security, subject to the SEC's regulatory purview.
Background of Digital Assets Regulation in Nigeria
In September 2020, the SEC issued the Statement on Digital Assets and their Classification and Treatment ("SEC Statement") to state its policy direction on digital assets regulation. Thereafter, in May 2022, the SEC issued the Rules on Issuance, Offering Platforms and Custody of Digital Assets ("Digital Assets Rules"), a comprehensive regulation which regulate, among others, digital/virtual asset services, the issuance and registration of digital assets as securities, and the registration and licensing of operators in the digital assets market. Subsequently, in March 2024, the SEC issued the Proposed Major Amendments to the Rules on Issuance, Offering Platforms and Custody of Digital Assets ("Proposed Amendments") which sought to address industry concerns and incorporate recommendations from stakeholders, including increasing the capital requirements for operators and clarifying the SEC's intention to regulate cryptocurrencies.
On 16 December 2024, the SEC issued the Exposure of Amendments to the Rules on Digital Assets Issuance, Offering Platform, Exchange and Custody ("Amended Digital Assets Rules" or " Rules"), which address inadequacies in existing regulation; introduce several important changes to the regulation of digital assets in Nigeria; and become effective on 30 June 2025. The Investment and Securities Act (ISA) was also recently amended to specifically classify virtual and digital assets as securities, providing the SEC with a clear mandate to regulate digital assets.
This article provides an overview of the Amended Digital Assets Rules, highlighting the notable changes and their implications for operators and stakeholders.
Notable Provisions of the Amended Digital Assets Rules
Some of the notable provisions of the Amended Digital Assets Rules are discussed below:
General Position on Digital Assets Regulation
In 2020, the SEC stated its position on digital assets regulation in the SEC Statement to the effect that crypto assets are securities, unless proven otherwise, and the burden of proving otherwise, is placed on the operator, issuer or sponsor of the digital assets. This position was reaffirmed in the Amended Digital Assets Rules.3 The SEC's classification captures a wide range of digital and crypto assets, including stablecoins, utility tokens, asset-referenced tokens, and e-money tokens. This stance has been further reinforced by the inclusion of digital assets in the Investment and Securities Act (ISA), formally classifying them as securities.
Applicability - Regulated Activities and Entities
A notable provision of the Amended Digital Assets Rules is the specificity of its applicability. Building on the provisions of the SEC's Statement and the Proposed Amendments, the Amended Digital Assets Rules stipulate both regulated activities and entities.
Regulated activities include, distributed ledger technology/blockchain-based offers of digital assets within Nigeria and all investment services activities relating to digital assets. Furthermore, the Amended Digital Assets Rules are applicable to persons (individual or corporate), whose activity involves any blockchain investment-based activity or services; foreign or non-residential issuers or sponsors of digital assets; and foreign or non-residential operators that actively target Nigerian investors directly or indirectly.4
This suggests that foreign operators who do not actively target the Nigerian market but are approached by Nigerian individuals may rely on reverse solicitation to avoid registration under the Rules. However, this exemption is unlikely to apply to issuers and sponsors, as their activities do not constitute a direct service offering to the public in the same way.
Incorporation of the Accelerated Regulatory Incubation Program
The SEC released the Framework on Accelerated Regulatory Incubation Program ("ARIP") for the Onboarding of Virtual Assets Service Providers ("VASPs") and other Digital Investments Service Providers in 2024 to facilitate the onboarding of qualified entities into the ARIP, provide guidance to the entities on regulatory demands before they become fully operational in the capital market, and to enable the SEC further understand the digital assets business models for effective regulation.5
The Amended Digital Assets Rules incorporate the ARIP and maintains it as the path to eventual registration for VASPs. The Amended Digital Assets Rules clarify that time spent in ARIP shall not exceed 12 months, after which entities transition to registration through filing an application for regularization of registration. The incorporation of ARIP is a welcome development as it ensures continuity and minimal disruption in the registration and licensing process when the Amended Digital Assets Rules come into force in June 2025.
Creation of New Registrable Functions
In addition to the existing registrable functions under the Digital Assets Rules, the Amended Digital Assets Rules create the Digital Assets Intermediary ("DAI") licence category to cover any person other than a Digital Assets Offering Platform ("DAOP"), Digital Assets Exchange ("DAX") or Digital Assets Custodian ("DAC") seeking to facilitate virtual assets transactions.6 A DAI may register as a broker/dealer, portfolio manager, trustee or investment adviser.7 Also, the Amended Digital Assets Rules create new sub-categories under the DAX licence, requiring a DAX to be registered either as a Digital Assets Over-the-counter Exchange or as a Digital Broker Model.
The new DAI category and sub-categories cover digital assets related activities such as management of digital assets or advising on digital assets investments. Therefore, the new registrable functions may address the challenge of activities that ought to be regulated but not covered under the existing licence categories, and ensures that all relevant digital assets activities are regulated.
Separation of Registrable Functions
The Amended Digital Assets Rules clarify the registrable functions available for VASPs and provide that the functions are standalone and cannot be combined. Therefore, while there is no prohibition on an entity undertaking multiple functions, such entity must fully meet the registration requirements for each function, obtain separate licences, provide such functions as distinct services, and comply with all applicable requirements for the licences.8
As a result of the separation of registrable functions, it will be critical for applicants to have a proper understanding of their business models and be exact about the applicable licence categories.
Exemption from Registration
The Amended Digital Assets Rules expand on the position in the SEC Statement as it relates to foreign VASPs by registering and affording recognition status to foreign VASPs where their primary jurisdiction is a member of the International Organisation of Securities Commissions ("IOSCO"), West Africa Regulators Association ("WASRA") or a jurisdiction with an existing reciprocal agreement with Nigeria.9
However, this privilege is dependent on conditions including registration to operate or authorisation to carry on a similar business in its primary jurisdiction; being from a comparable jurisdiction with whom the SEC has regulatory arrangements on enforcement and supervision; or satisfying the SEC that its registration is in the best interest of Nigeria. In practice, several foreign VASPs which the Amended Digital Assets Rules now seek to regulate should benefit from the exemption from registration.
Corporate Governance Requirements for VASPs
The Amended Digital Assets Rules introduce corporate governance requirements for VASPs. VASPs are required to have a minimum of five directors whose membership is to be approved by the SEC prior to incorporation of the entity. The board is also required to consist of at least one independent non-executive director; a chairman who shall be a non-executive director; and an executive director with a relevant financial technology background.10
Furthermore, the majority of the board members shall be non-executive directors; 60% of the board members are required to be of Nigerian origin; the Chief Executive Officer may only hold office for a maximum period of 10 years;11 and the board must have committees responsible for nomination and governance, remuneration, audit, and risk management.
The introduction of corporate governance requirements is a laudable move as it has the potential of ensuring proper management and governance of VASPs and building much-needed trust in an already delicate industry.
Regulation of Advertisement, Marketing and Promotion
The Amended Digital Assets Rules regulate the advertisement, marketing, and promotion of digital assets to protect investors from the growing popularity of financial influencers (finfluencers) promoting digital asset products and services or sharing any unauthorized financial investment opportunity on social media or any other medium of communication.
Notably, the provisions require SEC's prior approval for, and prohibit misleading advertisements, marketing, or promotions.12 Furthermore, VASPs are required to use simple, clear language and avoid unnecessary technical words and details in advertisements that could confuse or distract investors,13 and refrain from using high-sounding words, slogans and terminologies like "invest and secure your future", "top offer", "superior offer", "brighter future", "double your earnings now".14
In order to ensure a seamless process and avoid friction, it will be necessary to harmonise the requirement for SEC's approval for advertisements, marketing or promotions relating to digital assets with existing regulatory requirements for advertisements and marketing communications administered by the Advertising Regulatory Council of Nigeria ("ARCON").
Prohibition of Anonymity-Enhanced Cryptocurrencies
Anonymity-enhanced cryptocurrencies, also known as privacy coins, as the name suggests, enhance anonymity and reduce traceability of transactions. Due to their capability to obscure monetary transactions across networks, anonymity-enhanced cryptocurrencies are potential effective options for illegal transactions, and this has been a major regulatory concern.
In a provision targeted at addressing this, the Amended Digital Assets Rules prohibit VASPs from issuing or carrying out virtual asset activities related to anonymity-enhanced cryptocurrencies.15 This aligns with Nigeria's push to get off the Financial Action Task Force (FATF) Grey list, by reducing fraud and improving anti-money laundering practices.
Increased Financial Requirements
The Amended Digital Assets Rules introduce various increases in the minimum capital requirements, processing, registration, and sponsored individuals fees. Most notably, the minimum capital requirement for DAXs and DACs is increased to ₦1,000,000,000 (one billion Naira). Similar increases were introduced for processing, registration and sponsored individuals fees.16
The increases significantly raise the barrier to entry for prospective VASPs but reflects the SEC's commitment to ensure that registered VASPs have the ability to handle obligations and the financial strength to manage risks and operate efficiently. While this is desirable, it raises the concern of stifling industry growth.
Conclusion
The Amended Digital Assets Rules are set to come into force in June 2025 and have introduced several changes to digital assets regulation in Nigeria. The Digital Assets Rules, amongst others, build on the SEC's earlier regulatory positions, where necessary; incorporate existing frameworks such as ARIP; strictly regulate advertising, marketing and promotion of digital assets to protect consumers; and stipulate reasonable corporate governance practices for VASPs. The amendments are no doubt a welcome development in the Nigerian digital assets space, which requires clear and efficient regulation to spur innovation, protect investors and prevent adverse effects on Nigeria's financial and monetary stability.
Footnotes
1 https://www.statista.com/outlook/fmo/digital-assets/nigeria
2 You can read our publication on Nigeria's dynamic cryptocurrency regulatory landscape here.
3 Rule 2.0, Amended Digital Assets Rules
4 Rule 3, Amended Digital Assets Rules
5 You can read our overview of the Framework here.
6 Rule 66.0, Amended Digital Assets Rules
7 Rule 26.1.(iv), Amended Digital Assets Rules
8 Rule 7.10, Amended Digital Assets Rules
9 Rule 7.3, Amended Digital Assets Rules
10 Rule 9.2, Amended Digital Assets Rules
11 Rule 9.3, Amended Digital Assets Rules
12 Rule 15.1(1)(d), Amended Digital Assets Rules
13 Rule 15.1(1)(e), Amended Digital Assets Rules
14 Rule 15.1(1)(b)(iii), Amended Digital Assets Rules
15 Rule 30.0, Amended Digital Assets Rules
16 Rule 26.0, Amended Digital Assets Rules
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
