Governing Bodies and Key History
Nigeria’s regulatory landscape for virtual assets has seen significant evolution, moving from a restrictive stance to a more formalized, structured approach. Initially, the Central Bank of Nigeria (CBN) had issued a circular in 2021 that prohibited financial institutions from dealing with or facilitating payments for cryptocurrency exchanges. This led to a booming peer-to-peer (P2P) trading market.
The shift began in 2022 when the Securities and Exchange Commission (SEC) introduced a framework for the regulation of digital assets, recognizing them as a new class of securities. This framework was further strengthened by the Investments and Securities Act (ISA) 2025, which formally defined virtual and digital assets as securities, giving the SEC primary regulatory authority over the space.
In a major policy reversal, the CBN issued guidelines in December 2023, effectively lifting the ban on financial institutions from operating accounts for Virtual Asset Service Providers (VASPs). However, these guidelines require VASPs to first obtain a valid license from the SEC to open and operate a designated bank account.
The SEC has also introduced an Accelerated Regulatory Incubation Program (ARIP) as a pre-licensing structure to guide VASPs through a two-phase assessment and application process before they can apply for full registration.
The most recent text definition of key items
- Virtual Assets (VA): A digital representation of value that can be used as a medium of exchange/payment, or a unit of an account and is traded digitally. Unlike legal tenders, virtual assets’ value is determined by the community of users and they are not issued or guaranteed by any country or state. The ISA 2025 defines both virtual and digital assets as securities.
- Virtual Asset Service Provider (VASP): Any entity that conducts activities such as exchanging virtual assets and fiat currencies, exchanging one form of virtual asset for another, transferring virtual assets, safekeeping and/or administering virtual assets or instruments, and participating in the provision of financial services related to an issuer’s offer and/or sale of a virtual asset. Examples include virtual asset exchanges, wallet providers, and brokers.
- Digital Assets Exchange (DAX): A VASP that operates an electronic platform to facilitate the trading of virtual assets.
The key elements of their regulation
The regulatory framework in Nigeria is built on the principle of bringing digital assets under the existing securities law to ensure investor protection and market integrity.
- Classification as Securities: The most significant element is the classification of virtual assets as securities under the ISA 2025. This places them directly under the regulatory oversight of the SEC, which is now the lead regulator for the sector.
- Two-Phase Licensing: The SEC’s Accelerated Regulatory Incubation Program (ARIP) is the primary pathway for VASPs to enter the market. It is a pre-licensing program that assesses a company’s readiness before it can apply for full registration.
- Collaboration between Regulators: While the SEC is the primary regulator for VASPs, the CBN plays a crucial role in providing the banking infrastructure for these entities. The CBN’s guidelines now allow financial institutions to open and operate designated bank accounts for VASPs, but only if the VASP has a valid license from the SEC.
- Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF): The framework emphasizes strong AML/CTF compliance. The Money Laundering (Prevention and Prohibition) Act 2022 recognizes VASPs as financial institutions, and the CBN’s guidelines mandate banks to implement risk mitigation systems for AML/CFT and customer due diligence.
Requirements for the VASP
To be registered with the SEC and operate legally in Nigeria, VASPs must meet several stringent requirements.
- Corporate Structure: A VASP must be a body corporate with an office in Nigeria managed by a company director. There is also a requirement for a minimum of five board members, with 60% being of Nigerian origin, subject to prior SEC approval.
- Financials: The minimum paid-up capital requirement for a VASP is N500 million, with some new regulations suggesting a potential increase to N1 billion for digital asset firms. A fidelity bond covering at least 25% of this capital is also required.
- Operational Requirements: Applicants must submit a business model that contributes to the capital market’s development and demonstrate adequate financial, human, and technological resources for operations. This includes strong cybersecurity systems and a contingency plan for system errors or failures.
- Compliance and Reporting: VASPs must adhere to robust KYC procedures and AML/CTF protocols. They have an obligation to ensure fair treatment of users, manage conflicts of interest, and provide a clear avenue for customer complaints. They must also submit regular reports to the SEC on trading statistics, financials, and compliance.
What it means for the stakeholders
- Financial Institutions: The lifting of the ban by the CBN allows banks and other financial institutions to provide designated bank and settlement accounts for VASPs. However, they are prohibited from holding or trading virtual currencies on their own account. This move integrates the crypto market with the traditional financial system while maintaining regulatory control.
- Investors: The new framework is designed to enhance investor protection and market transparency. By classifying virtual assets as securities, the SEC provides a legal safety net and a clear mechanism for dispute resolution, which was previously non-existent. For retail investors, there are limits on how much they can invest per issuer.
- VASPs and Fintechs: The regulatory clarity and legal recognition of digital assets provide a new dawn for fintech operators and VASPs. The ARIP offers a structured path to legitimacy. However, the high minimum capital requirements and strict compliance obligations can be a significant barrier to entry, particularly for smaller startups. Additionally, a new tax regime, effective in 2026, will impose a 30% corporate income tax on VASP profits and up to 25% personal income tax on gains from digital asset sales, with severe penalties for non-compliance.
Useful Links
- SEC New Rules on Issuance, Offering Platforms and Custody of Digital Assets: https://sec.gov.ng/wp-content/uploads/2022/05/New-Rules-on-Issuance-Offering-Platforms-and-Custody-of-Digital-Assets.pdf
- CBN Guidelines on the Operation of Bank Accounts for Virtual Asset Service Providers (VASPs): https://www.cbn.gov.ng/Outs/2023/FPR-DIR-PUB-CIR-002-003-GUIDELINES-ON-OPERATIONS-OF-BANK-ACCOUNTS-FOR-VIRTUAL-ASSET-SERVICE-PROVIDERS-VASPS.pdf
- Insights and perspectives on the SEC’s new rules on Digital Assets: https://pwcnigeria.typepad.com/files/insights-and-perspectives-on-the-securities-and-exchange-commissions-new-rules-on-digital-assets.pdf
- What the Investment and Securities Act 2025 Means for Digital and Virtual Assets in Nigeria: https://uubo.org/wp-content/uploads/2025/05/WHAT-THE-INVESTMENT-AND-SECURITIES-ACT-2025-MEANS-FOR-DIGITAL-ASSETS-IN-NIGERIA.pdf
