Nigerian President Legalizes Bitcoin, Classifies as Security

Last month, President Tinubu signed the Investment and Securities Act (ISA) 2025 into law, officially recognizing Bitcoin and other digital assets as securities. This marks the first time Nigerian regulators have officially acknowledged Bitcoin, albeit with some debate over its classification as a security. The new law aims to bring much-needed regulatory clarity to the digital assets ecosystem, fostering innovation, investment, and protection for investors.

The ISA 2025 repeals the previous 2007 Investments and Securities Act No. 29, which governed the Nigerian Securities and Exchange Commission (SEC). The new Act updates the regulatory framework to address current economic realities and long-standing challenges, empowering the SEC to foster innovation, protect investors more efficiently, and reposition Nigeria as a competitive destination for local and foreign investments. The Director-General of the Nigerian SEC, Dr. Emomotimi Agama, highlighted the significance of the development, stating that the new Act addresses regulatory gaps and introduces forward-looking provisions to enhance the country's capital markets.

The revised legal and regulatory framework now classifies digital assets as securities, meaning the Nigerian SEC will primarily oversee exchanges and businesses operating in the digital assets sector. The new Act introduces several significant changes, including prioritizing transparency, improving investor protection, cracking down on Ponzi schemes and fraudulent activities, and aligning with global standards from bodies such as the International Organization of Securities Commissions (IOSCO). This alignment allows the Nigerian SEC to maintain its "Signatory A" status under IOSCO’s Enhanced Multilateral Memorandum of Understanding (EMMoU).

Under ISA 2025, all virtual assets and investment contracts are officially recognized as securities. This means that all Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges (DAEs) fall under the Nigerian SEC’s oversight. The aim is to improve investor protection and prevent fraud and abuse from market players in the emerging digital assets space. Fraudulent investment schemes are now strictly prohibited, with the Nigerian SEC having the authority to impose fines of at least N20 million, prison sentences of up to 10 years for promoting Ponzi schemes, or both. They also have the authority to access data from Nigerian telecom and internet providers to track illegal activities like market manipulation and insider trading.

With Bitcoin’s legalization and a more transparent regulatory framework in Nigeria, companies can explore new financial products and services without previous uncertainties. The Act provides market players and investors additional mechanisms and avenues to seek redress and curb fraudulent digital asset activities. For Bitcoin entrepreneurs in Nigeria, the Act is a welcomed change. However, sentiment is split evenly between relief and trepidation from the potential negative consequences introduced by the classification of Bitcoin as a security. Onionsman, CEO of the Naira FX and Crypto rates aggregator Monierate, pointed out that the Act creates significant barriers to entry for less-capitalized builders and service providers, potentially leading to a concentration among entities and individuals with deep pockets, effectively ending the permissionless innovation that has been a hallmark of the Bitcoin industry.

Additionally, Bitcoin's uniqueness compared to other digital assets means it will challenge the Act's blanket classification due to its decentralization and absence of a single issuer. An arduous transition awaits Bitcoin businesses, as they now have a clear path to formalize their operations by seeking the appropriate licenses from the Nigerian SEC, updating their internal operations accordingly, KYC/AML frameworks, and compliance reporting. Specific dynamics, like high compliance costs and other operational frictions for companies building Bitcoin products and services, will raise barriers for new ventures. As a result, Bitcoin companies will need to navigate the new regulation, hoping for improvements over time. Heritage Faloudun, CEO of Cashwyre, a Bitcoin remittance app, commented, "We're transitioning from building cautiously to building officially." Adding, “While this may require internal restructuring, it's a necessary price for long-term sustainability.”

For veteran Nigerian Bitcoin founders like Bernard Parah, CEO of the Bitcoin financial services company Bitnob, the Act is a starting point for outreach and further conversation with regulators. In an interview about the recent law, he said, "It's good that there's clearer regulation. Now that this is done, it's easier to work on specific amendments as the industry matures." The growth and success of the Bitcoin space in Nigeria over the next decade will be driven by increased regulatory clarity and ongoing discussions to distinguish Bitcoin from other digital assets. Appropriate regulations that clearly define this distinction will enhance and streamline the ecosystem, helping eliminate fraud and misinformation. Ultimately, this will foster greater innovation and promote economic development within this burgeoning global industry. Heritage put it best when asked about the outlook for Nigerian Bitcoin builders, “these are necessary growing pains if we're truly committed to transforming how Africans send and receive value globally.”