Nigeria's New Law on Virtual Assets May Remove FATF Grey List Status

Nigeria is poised to be removed from the Financial Action Task Force (FATF) grey list, thanks to its recent decision to categorize virtual assets and investment contracts as securities under the Investment and Securities Act (ISA) 2025. This landmark legislation, signed into law by President Bola Ahmed Tinubu, aims to combat fraud in the digital asset space while fostering trust and innovation in blockchain technologies. By doing so, Nigeria has positioned itself as a leader in digital finance within Africa.

The new laws address deficiencies in anti-money laundering (AML) and counter-terrorism financing (CTF) that led to Nigeria’s inclusion on the FATF grey list. The ISA 2025 repeals the Investments and Securities Act No. 29 of 2007 and officially classifies cryptocurrencies and other virtual assets as securities. This move is expected to enhance transparency, attract increased investments, and curb fraudulent activities in the digital asset sector. The legislation comes after years of regulatory uncertainty and tension between the Nigerian government and the growing crypto sector.

In February 2021, the Central Bank of Nigeria (CBN) issued a directive prohibiting financial institutions from facilitating crypto transactions due to concerns over money laundering, terrorism financing, and lack of consumer protection. This ban sparked public outrage, particularly among the tech-savvy youth who rely on crypto as an alternative store of value amidst high inflation and economic instability. Despite the ban, Nigeria emerged as Africa’s largest cryptocurrency market by volume, with citizens finding creative ways to bypass government restrictions through peer-to-peer (P2P) trading. The persistent demand and global adoption rate of digital assets forced the government to reconsider its stance, leading to the enactment of ISA 2025.

Dr. Emomotimi Agama, Director General of the Securities and Exchange Commission (SEC), highlighted the significance of the new law in addressing AML and CTF concerns that led to Nigeria’s placement on the FATF grey list in February 2023. He stated that the inclusion of this law provides an avenue for Nigeria to exit the grey list, signaling to the international community that the country is ready for business and committed to protecting legitimate enterprises. The SEC now has the power to regulate Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges, bringing them under its direct oversight.

In December 2022, the CBN published strict guidelines for banks and financial institutions opening crypto accounts, recognizing the need to regulate the activities of VASPs. This move followed the CBN’s lifting of the ban on banks’ operation accounts for VASPs, acknowledging the global trend towards regulating digital assets. The CBN’s revised stance allowed crypto firms to open bank accounts with Nigerian banks, reflecting the country’s high rate of crypto adoption and the need for regulatory clarity.

Financial analyst Olumide Adesina emphasized the importance of this legislation, stating that it brings clarity to the Nigerian capital market and affirms the role of digital assets. He predicted that the law would attract major global players to engage directly with Africa’s biggest crypto market, widen tokenization usage, and intensify interest among the younger population. Dr. Agama further underscored the SEC’s new authority to clamp down on unregulated entities, encouraging all stakeholders in the digital asset space to seek regulatory clearance.