Nigeria Recognizes Crypto as Securities, Attracts Global Investments

In a significant move for Africa’s largest crypto market, Nigeria has officially recognized virtual assets and investment contracts as securities. This development comes with the signing of the Investment and Securities Act (ISA) 2024 by President Bola Tinubu. The new act repeals the Investments and Securities Act No. 29 of 2007, marking a pivotal shift in the regulatory landscape for digital assets in the country.

With the enactment of ISA 2024, Nigeria has positioned itself as a leader in digital finance within Africa. The legislation provides greater transparency and is expected to attract increased investments in the crypto sector. This move comes after years of regulatory uncertainty and tension between the Nigerian government and the burgeoning crypto industry.

In February 2021, the Central Bank of Nigeria (CBN) issued a directive prohibiting financial institutions from facilitating crypto transactions. This ban was driven by concerns over money laundering, terrorism financing, and lack of consumer protection. The directive sparked public outrage, particularly among the tech-savvy youth who had turned to crypto as an alternative store of value amidst high inflation and economic instability. Despite the ban, Nigeria emerged as the largest cryptocurrency market in Africa by market volume, with citizens finding creative ways to bypass government restrictions through peer-to-peer (P2P) trading.

The persistent demand for digital assets and the growing global adoption rate forced the government to reconsider its position. This culminated in the enactment of ISA 2024, which officially classifies crypto and other virtual assets as securities for the first time. The new law brings Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges under the direct oversight of the Securities and Exchange Commission (SEC).

In December 2022, the CBN published strict guidelines for banks and financial institutions opening crypto accounts. This move came after the CBN lifted the ban on banks’ operation accounts for VASPs, recognizing the need to regulate the activities of virtual asset service providers. 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 necessity to engage with digital assets.

Nigerian financial analyst Olumide Adesina highlighted the significance of this legislation, stating that it brings clarity and affirms the input of digital assets in the Nigerian capital market. Adesina further noted that the law is likely to attract major global players to engage directly with Africa’s biggest crypto market, potentially leading to the establishment of physical presences in the region. Additionally, the legislation is expected to widen the usage of tokenization built on traditional assets and intensify interest among the younger populace.