In Africa’s largest crypto market, Nigeria, virtual assets and investment contracts are formally recognized as securities following the Investment and Securities Act (ISA) 2024, signed into law by President Bola Tinubu.
With the new act signed into law, Nigeria has positioned itself as the digital finance leader in Africa.
Regulatory Clarity After Years of Uncertainty and Tension
In a landmark legal shift, Nigerian lawmakers have finally recognised cryptocurrencies as securities. Nigeria’s President, Bola Tinubu, recently added digital assets to the Investment and Securities Act (ISA) 2024, which repeals the Investments and Securities Act No. 29 of 2007. According to Forbes Africa and local Nigerian news agency Business Day reports, Nigeria’s new capital markets law officially classifies crypto and other virtual assets as securities for the first time. The landmark legislation is expected to provide greater transparency and increased investments.
The legislation is welcomed after Nigeria faced years of regulatory uncertainty and tension between its government and the burgeoning crypto sector. On February 1, 2021, supported by concerns over money laundering, terrorism financing, and lack of consumer protection, the Central Bank of Nigeria (CBN) issued a directive prohibiting financial institutions from facilitating crypto transactions. The outright ban evoked public outrage, especially among the country’s tech-savvy youth, who have increasingly turned to crypto as an alternative store of value amid high inflation, economic instability and uncertainty.
Despite the prohibitive ban from the government, Nigeria emerged as the largest cryptocurrency market in Africa by market volume as citizens, spurred by necessity, kept finding creative ways to bypass government restrictions through peer-to-peer (P2P) trading. The persistent demands and growing global adoption rate of digital assets forced the government to reconsider its position, culminating in the enactment of ISA 2024.
Relaxing Crypto Bans
In December 2022, the Nigerian Central Bank (CBN) published strict guidelines for banks and financial institutions opening crypto accounts. The guidelines were issued after the CBN lifted the ban on banks’ operation accounts for virtual asset service providers (VASPs). At the time, the CNB recognized the need to revise its 2021 policy, stating:
“However current trends globally have shown that there is need to regulate the activities of virtual assets service providers (VASPs), which include cryptocurrencies and crypto assets.”
Just days after the CBN issued a comprehensive ban on banks engaging with crypto, the CBN revised its restrictions on banks facilitating crypto transactions. After a nearly two-year comprehensive ban on banks’ involvement with digital currencies, the CBN relaxed its restrictions by allowing crypto firms to open bank accounts with Nigerian banks. Nigeria boast one of the highest rates of crypto adoption and forced the CBN to revise its stance toward digital assets.
Bringing Cryptocurrencies Under the Purview of the SEC
According to Forbes’ reporting, “the new law provides long-awaited regulatory clarity, bringing Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges under the direct oversight of the Securities and Exchange Commission (SEC).”
Nigerian financial analyst Olumide Adesina spoke to Forbes Africa, highlighting the importance of this legislation, stating:
“The regulation brings clarity and affirms the input of digital assets in the Nigerian capital market.”
Adesina adds:
“The law would likely attract huge players in the global industry to engage directly by setting up a physical presence with Africa’s biggest crypto market. Finally, it will also widen tokenization usage built on traditional assets and intensify interest among the younger populace.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice
