Introduction

On March 29, 2025, Nigeria took a historic step toward regulating its rapidly growing cryptocurrency market by enacting the Investment and Securities Act (ISA) 2025. Signed into law by President Bola Ahmed Tinubu, this legislation formally recognizes cryptocurrencies and other virtual assets as securities, ending over a decade of regulatory ambiguity. The law places Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges under the oversight of the Securities and Exchange Commission (SEC), marking a transformative moment for digital finance in Africa’s largest economy. This article explores the key provisions of the ISA 2025, its implications for Nigeria’s crypto market, and its potential to position the country as a leader in global digital finance.

Key Provisions of the ISA 2025

Recognition of Cryptocurrencies as Securities

The ISA 2025, which repeals the Investments and Securities Act of 2007, introduces significant reforms to align Nigeria’s capital market with international best practices. A pivotal change is the classification of virtual assets, including cryptocurrencies, digital asset tokens, stablecoins, and non-fungible tokens (NFTs), as securities (Sycamore Blog). The law defines virtual assets as digitally represented assets that can be traded, transferred, or used for payments or investments, but explicitly excludes digital versions of fiat currencies, such as central bank digital currencies (CBDCs) (Businessday NG). This distinction ensures that state-backed digital currencies are not subject to securities regulations.

The recognition of cryptocurrencies as securities subjects them to the same regulatory framework as traditional financial instruments. Securities exchanges are now defined as platforms that facilitate the trading of securities, virtual assets, commodities, or financial products, bringing crypto exchanges into the regulatory fold (Nairametrics).

Ban on Ponzi Schemes

To combat fraudulent activities that have plagued Nigeria’s capital market, the ISA 2025 explicitly bans Ponzi schemes. The SEC is empowered to prosecute operators of such schemes, with penalties including fines of up to ₦40 million, 10-year prison sentences, or both (Sycamore Blog). Additionally, the SEC can recover profits gained through fraudulent activities to provide restitution for affected investors. The law also mandates the use of Legal Entity Identifiers (LEIs) for capital market transactions to enhance transparency and reduce fraud risks (SIAO).

Enhanced SEC Oversight

The ISA 2025 strengthens the SEC’s authority as the apex regulator of Nigeria’s capital market. The SEC now has greater power to access data from telecom and internet providers to track illegal activities such as insider trading, market manipulation, and fraudulent investment schemes. This enhanced oversight extends to VASPs, DAOPs, and Digital Asset Exchanges, ensuring compliance with regulatory standards (SIAO).

Nigeria’s Cryptocurrency Landscape

Global Leader in Crypto Adoption

Nigeria’s cryptocurrency market is one of the most vibrant in the world, driven by a young, tech-savvy population and economic challenges such as currency devaluation. According to the Chainalysis 2024 Global Crypto Adoption Index, Nigeria ranks second globally in cryptocurrency adoption, trailing only behind India. The country’s high volume of peer-to-peer (P2P) transactions and stablecoin usage has outpaced its regulatory framework until now.

Stablecoins, which are cryptocurrencies pegged to stable assets like the US dollar, have become particularly popular in Nigeria due to the naira’s volatility. A Cointelegraph report indicates that stablecoins account for approximately 43% of Sub-Saharan Africa’s total crypto transaction volume, with Nigeria and Ethiopia leading the trend. This surge is attributed to individuals and businesses using stablecoins to hedge against inflation and exchange rate fluctuations.

MetricDetails
Global Crypto Adoption Rank2nd (Chainalysis 2024)
Stablecoin Transaction Volume43% of Sub-Saharan Africa’s total crypto transactions
Key StablecoinsUSDT (Tether), USDC (USD Coin)
Primary Use CaseHedging against naira devaluation, remittances, P2P transactions

Regulatory Evolution

Nigeria’s approach to cryptocurrency regulation has evolved significantly. In 2021, the Central Bank of Nigeria (CBN) banned banks from facilitating crypto transactions, citing concerns over money laundering and financial instability. However, the ban was lifted in December 2023, signaling a shift toward a more open but regulated approach. The SEC’s introduction of the Accelerated Regulatory Incubation Program (ARIP) in June 2024 marked a turning point, with provisional licenses granted to crypto exchanges Quidax and Busha in August 2024 (Forbes).

The ISA 2025 builds on these developments, providing a comprehensive legal framework for digital assets. The SEC has since expanded the ARIP to include additional digital asset exchanges, offering platforms, and custodians, with plans to accelerate license issuance in 2025 (TechCabal).

Implications for Nigeria’s Economy

Fostering Innovation

By recognizing cryptocurrencies as securities, the ISA 2025 creates a safer environment for fintech companies to develop new financial products and services. The regulatory clarity is expected to encourage innovation in blockchain technologies, positioning Nigeria as a hub for digital finance in Africa (SIAO). The inclusion of stablecoins and NFTs under the securities framework also opens opportunities for diverse investment products.

Attracting Investment

The clear regulatory framework is likely to attract both domestic and international investors to Nigeria’s crypto market. The SEC’s provisional licensing program demonstrates a commitment to balancing innovation with investor protection, which could boost confidence among institutional investors. The law’s alignment with international standards, such as those set by the International Organization of Securities Commissions (IOSCO), further enhances Nigeria’s appeal as a destination for capital market investments (Sycamore Blog).

Challenges and Considerations

Despite its progressive stance, the ISA 2025 faces challenges. The exclusion of digital fiat currencies from the securities definition raises questions about the regulatory status of stablecoins pegged to fiat currencies, such as Tether (USDT). Additionally, the naira’s ongoing volatility and public skepticism toward government-backed digital currencies, like the eNaira, could complicate the adoption of regulated stablecoins like cNGN (Techpoint Africa). The SEC will need to navigate these complexities to ensure effective implementation.

Global Context

Nigeria’s recognition of cryptocurrencies as securities places it among a growing number of countries seeking to regulate digital assets. The United States, Hong Kong, and the European Union are also developing stablecoin and crypto regulatory frameworks, reflecting a global trend toward integrating digital assets into mainstream finance. Nigeria’s proactive approach, combined with its high crypto adoption rate, positions it as a leader in Africa’s digital finance landscape (CoinStats).

Conclusion

The Investment and Securities Act (ISA) 2025 represents a landmark achievement for Nigeria’s capital market and cryptocurrency sector. By classifying cryptocurrencies and virtual assets as securities, banning Ponzi schemes, and enhancing SEC oversight, the law addresses long-standing challenges while paving the way for innovation and investment. With Nigeria ranking second globally in crypto adoption and stablecoins driving significant transaction volumes, the ISA 2025 is a timely and strategic move. As the SEC continues to issue provisional licenses and refine its regulatory approach, Nigeria is poised to become a global leader in digital finance, setting a precedent for other nations navigating the complexities of cryptocurrency regulation.