Nigeria Legalizes Cryptocurrencies As Securities, Empowering SEC

Nigeria’s President, Bola Ahmed Tinubu, has signed a significant piece of legislation that recognizes digital assets as securities within the country. This new law, titled the Investments and Securities Act 2024, brings cryptocurrencies under the jurisdiction of the Nigerian Securities and Exchange Commission (SEC). This move is part of a broader strategy to foster a digital economy in Nigeria and position the country as a hub for crypto finance, especially as many other nations are tightening regulations on digital currencies.

The new law addresses a critical gap in the previous regulatory framework, the ISA Act of 2007, which did not explicitly mention cryptocurrencies. By recognizing digital assets as securities, the law provides a legal framework for their use in investment contracts. This regulation also empowers the SEC to oversee the use of cryptocurrencies, which is a common practice in countries with similar regulations. Additionally, the law aims to combat Ponzi schemes that often exploit cryptocurrencies to attract new participants.

The SEC has welcomed the new regulations, emphasizing their role in managing the rapidly growing crypto market. Emomotimi Agama, the director-general of the SEC, stated that the ISA 2024 reflects the commission's commitment to building a dynamic and resilient capital market. The new act is designed to foster innovation, protect investors more efficiently, and position Nigeria as a competitive destination for both local and foreign investments. The SEC also noted that the new regulations align Nigeria’s standards with those of the International Organization of Securities Commissions (IOSCO).

Nigeria has been increasing its regulatory measures around cryptocurrencies over the past few years, similar to many other countries. One aspect of this effort includes attempts to tax revenue generated from crypto assets, although these plans were not included in the new law. The regulatory changes are expected to bring stability to the market, although some investors remain skeptical about government involvement in the crypto sector. With the new law, cryptocurrencies are now treated similarly to traditional financial assets, reflecting their widespread acceptance.

The Nigerian government has outlined several expected outcomes from these regulatory changes. These include enhancing market integrity, boosting investor confidence, and managing systemic risks. While not all of these goals depend solely on the treatment of cryptocurrencies, the new law is a significant step toward modernizing the Nigerian financial sector. The law is expected to have measurable effects within a few months of its implementation.

The Nigerian crypto market has seen substantial growth in recent years, with a market value exceeding $400 million in 2024. It is projected to increase by approximately 13 percent by 2028. Between July 2022 and June 2023, the value of transactions in the Nigerian crypto market reached about $56.7 billion, representing an annual growth rate of about nine percent. Approximately 70 percent of these holdings are modest, with less than $100 per holder. Currently, about 34 percent of Nigerians have some form of crypto holdings in their portfolios, a number expected to rise as crypto acceptance grows.

In addition to the new law, Nigeria is currently involved in a legal dispute with Binance, one of the largest crypto exchanges. In 2023, the Nigerian SEC declared Binance’s operations in the country illegal, leading to legal issues and accusations of tax evasion and currency manipulation. In February 2024, Nigerian authorities arrested Tigran Gambaryan, Binance’s head of financial crime compliance, and filed a lawsuit against the exchange. Many view the new regulations as a response to these controversies, aiming to bring clarity and stability to the industry.

In summary, Nigeria has introduced a new law that legalizes the use of cryptocurrencies as securities and assigns the SEC the responsibility of regulating the industry. The primary goal of this measure is to regulate the crypto market, provide stability, and attract more investments into the country. With a substantial crypto market and a growing economy, Nigeria is poised for further growth in the crypto sector. The new law also addresses ongoing legal issues with Binance, aiming to prevent similar controversies in the future.