INTRODUCTION
In recent times, the rapid advancement of digital technology has significantly transformed the manner in which transactions are conducted and assets are managed. Traditional assets such as physical properties and securities, with their inherent limitations, have evolved into digital counterparts commonly referred to as Digital Assets.
Digital assets, in their simplest definition, encompass anything created and stored digitally that is identifiable, discoverable, and holds or provides value. These assets span a wide range of intangible items existing in electronic form, representing ownership, value, or rights. Examples of digital assets include videos, e-books, social media accounts, music, cryptocurrencies (such as Bitcoin, Ethereum, and other altcoins), tokenized assets, and more.
A notable subset of digital assets is Virtual Assets, which are digital representations of value that can be digitally traded or transferred and used for payment or investment purposes. However, virtual assets do not include digital representations of fiat currencies (that is government-issued money). Examples of virtual assets include cryptocurrencies, certain in-game tokens, and Non-Fungible Tokens (NFTs) that hold financial value. While the terms “digital asset” and “virtual asset” are often used interchangeably, the distinction lies in the fact that all virtual assets are digital assets, but not all digital assets are virtual assets. To qualify as a virtual asset, a digital asset must carry intrinsic value and be capable of being exchanged for another asset.
In recent years, there has been an exponential rise in the adoption of virtual assets, particularly cryptocurrencies, on a global scale. Nigeria, with its youthful population exhibiting a strong propensity for digital innovations, has not been left out of this trend. The widespread adoption of cryptocurrencies among the younger demographic played a pivotal role in the Nigerian government’s decision to lift the ban on cryptocurrency transactions in December 2023 and transition towards a regulatory approach. This shift in regulatory stance has opened up significant business opportunities, particularly for Virtual Asset Service Providers (VASPs).
VASPs are entities that facilitate the exchange, transfer, safekeeping, and administration of virtual assets on behalf of clients. Examples are Quidax and Busha. Recognizing the growing relevance of virtual assets, the Nigerian government has sought to regulate the activities of VASPs to ensure compliance with financial laws, promote consumer protection, and prevent illicit activities.
This piece aims to explore the evolving legal and regulatory framework guiding the operations of VASPs in Nigeria, examining the compliance requirements and licensing processes.
REGULATORY FRAMEWORK
The regulatory landscape for virtual assets in Nigeria remains dynamic and evolving. As of the time of this publication, the primary regulatory authority overseeing Virtual Asset Service Providers (VASPs) is the Securities and Exchange Commission (SEC).
· Securities and Exchange Commission (SEC)
The Commission first articulated its regulatory stance on virtual crypto assets through a circular issued on the 14th of September 2020, titled Statement on Digital Assets and their Classification and Treatment wherein it maintained that virtual crypto assets are classified as securities and consequently fall under the regulatory purview of the SEC, unless proven otherwise.
Based on this position and pursuant to its statutory mandate under Section 13 of the Investment and Securities Act 2007 (now defunct) which empowers the SEC as the apex regulatory body for the Nigerian capital market to regulate investments and securities, the SEC introduced its first regulation titled Rules on Issuance, Offering Platforms, and Custody of Digital Assets to guide the operations of VASPs on the 11th of May 2022
This regulatory framework was subsequently revised to align with emerging market trends and technological advancements. The amended version of the Rules is expected to take effect on the 30th of June 2025, supersedingthe earlier Statement on Digital Assets and their Classification and Treatment.
In unveiling the amended rules, the Commission published the Exposure of Amendments to the Rules on Digital Assets Issuance, Offering Platform, Exchange, and Custody (Amended Rules), which introduces several notable and novel provisions affecting VASPs. These provisions are designed to enhance transparency, promote investor protection, and ensure the stability of the virtual asset market.
The Amended Rule in its definition section defines the terms Virtual Asset, Virtual Asset Services, Virtual Asset Service Providers thus:
· Virtual Asset means a digital representation of value that can be transferred, digitally traded and can be used for payment or investment purposes. It shall not include digital representations of fiat currencies, securities and other financial assets.
· Virtual Assets Service means any of the following services and activities relating to any virtual asset:
i. operation of a trading platform for virtual assets;
ii. exchange of virtual assets for other virtual;
iii. exchange between virtual assets and fiat currencies;
iv. exchange between one or more forms of virtual assets;
v. providing custody and administration of virtual assets on behalf of clients;
vi. issuing, listing, buying and selling of virtual assets;
vii. execution of orders for virtual assets on behalf of clients;
viii. placing of virtual assets;
ix. reception and transmission of orders for virtual on behalf of clients;
x. providing advice on virtual assets;
xi. providing portfolio management on virtual assets;
xii. providing transfer services for virtual assets on behalf of clients
· Virtual Asset Service Provider means any person (individual or corporate) who is registered to perform any function relating to virtual assets services.
Part B of the Rules provides the general registration requirements of a VASP. The requirement for registration are:
1. The proposed VASP/applicant must be incorporated in Nigeria under CAMA 2020 with its principal officers resident in Nigeria.
2. The applicant shall first complete and submit an ARIP initial assessment form via the SEC ePortal.
THE ACCELERATED REGULATORY INCUBATION PROGRAM (ARIP)
The SEC launched the ARIP in June 2024 to onboard crypto startups and operators in a sandbox-like environment. This initiative allows crypto companies to obtain provisional licences. This program also allows the Commission to assess digital asset business models to ensure that they are properly structured including adequate provisions to address risks and issues surrounding market integrity, investor protection and money laundering before introducing the models to the market to operate at full capacity. Approval granted under the ARIP provision, shall have the following characteristics:
a. It shall be an approval-in-principle (AIP) registration valid for a specified period, not exceeding 12 calendar months.
b. Qualified VASPs at the expiration of the AIP period shall be transitioned to registration for regularization after complying with all applicable registration requirements or any other provisions as may be prescribed by the Commission from time to time.
An application into the ARIP shall be made online on the appropriate Form via the SEC ePortal upon payment of a non-refundable processing fee of N2,000,000.00 (Two Million Naira, only) and shall be accompanied by the following:
a. Form SEC 2 and 2D – (A minimum of 4 Sponsored Individuals who shall be principal officers including Managing Director and Compliance Officers).
b. A copy each of the following corporate documents duly certified by the CAC;
i. Certificate of Incorporation (original to be sighted);
ii. Memorandum and Articles of Association which shall include the power to perform the specified function;
iii. CAC Form(s) showing Statement of Share Capital, Return of Allotment, and particulars of Directors;
c. Latest audited accounts or audited statement of affairs of the company in the case of a new company;
d. Tax Identification Number and Clearance Certificate;
e. Valid means of identification (including NIN and BVN) of the sponsored individuals;
f. A sworn undertaking that the applicant will be able to operate an orderly, fair and transparent market in relation to the securities that are offered or traded, on or through its platform;
g. Evidence of registration with Nigerian Financial Intelligence Unit (NFIU);
h. Sworn undertaking to keep proper records and render returns as may be specified by the Commission from time to time, signed by a director or the company secretary;
i. Sworn undertaking by a director or the company secretary, to abide by SEC Rules and Regulations and Investments and Securities Act No.29 of 2007 as may be amended from time to time.
1. Applicants who are successful in the ARIP shall file an application for regularization of registration via the SEC ePortal. The application shall be accompanied with a request for registration of potential sponsored individuals/compliance officer who shall include the principal officers (i.e. CEO, COO, RO and CO) as well as the following corporate documents:
a. Certificate of Incorporation (original to be sighted)
b. Memorandum and Articles of Association which shall include the power to perform the specified function (with the object clause clearly stipulating the intended capital market activity (ies) and/or ancillary activities)
c. Company’s CAC status report showing statement of share capital, return of allotment, and particulars of directors
d. Latest audited accounts (or audited statement of affairs of the company in the case of a new company)
e. Tax identification number (TIN) and clearance certificate
f. The Commission may request such other documents as it considers necessary for registration
2. The applicant shall file an affidavit undertaking the following:
a. the applicant will be able to carry out its obligations as set out under these Rules;
b. the information or document that is furnished by the applicant to the Commission is not false or misleading nor does it contain any material omission;
c. the applicant is not in the course of being wound up or otherwise dissolved
d. no receiver manager or an equivalent person has been appointed within or outside Nigeria, or in respect of any property of the applicant;
e. the applicant has not, whether within or outside Nigeria, entered into a compromise or scheme of arrangement with its creditors, being a compromise or scheme of arrangement that is still in operation;
f. the applicant’s directors, chief executive, controller, and any person who is primarily responsible for its operations or financial management are fit and proper, taking into account the fit and proper criteria as provided in the SEC Rules and Regulations;
g. the applicant will be able to take appropriate action against a person in breach including directing the person in breach to take any necessary remedial measure;
h. the applicant will be able to manage risks associated with its business and operation including demonstrating the processes and contingency arrangement in the event the applicant is unable to carry out its operations;
i. the applicant has sufficient financial, human and other resources for its operation, at all times;
j. the applicant has appropriate security arrangements which include maintaining a secured environment pursuant to the Commission’s Rules on Technology Risk Management; and
k. there are no other circumstances which are likely to lead to the improper conduct of operations by the applicant or by any of its directors, chief executive, controller or any person who is primarily responsible for the operations or financial management of the applicant; or reflect discredit in the manner it operates its business;
3. The applicant is required to submit a business model which has a clear or unique value proposition or will contribute to the overall development of the capital market.
Where an applicant is regulated by another primary regulator, the applicant shall submit to the Commission a “no objection” or approval letter from the relevant primary regulator when making an application.
Under the Amended Rule, a virtual asset service provider may apply to the Commission for registration under any of the following functions:
1. Digital Assets Offering Platforms (DAOP),
2. Digital Assets Exchange (DAX)
3. Digital Assets Custodians (DAC)
4. Digital Assets Intermediary (DAI)
A VASPs is entitled to apply for any of the above-listed and cannot combine two or more functions. The financial requirement (i.e minimum capital, processing and registration fees) for each function are as follows:
S/N | FUNCTION | MINIMUM CAPITAL ( | REGISTRATION FEE ( | PROCESSING FEE ( |
1. | Digital Assets Offering Platform (DAOP) | 500 million | 50 million | 5 million |
2. | Digital Assets Exchange (DAX); a) DA OTC Exchange | 1 billion | 100 million | 10 million |
| b) Digital broker model | 1 billion | 1 billion | 1 billion |
3. | Digital Assets Custodian (DAC) | 1 billion | 100 million | 10 million |
4. | Digital Assets Intermediary (DAI) a) Broker/dealer b) Portfolio Manager c) Trustee d) Investment Adviser | 500 million 300 million 200 million 100 million | 50 million 30 million 10 million 10 million | 5 million 3 million 3 million 3 million |
It should be mentioned that the Amended Rules acknowledges the possibility of foreign Virtual Assets Service Providers (VASPs) registering with the SEC. It outlines key considerations that the SEC would evaluate in deciding whether to grant such registration. The SEC may accord recognition to a foreign VASP if its primary country of operation either holds membership in the International Organisation of Securities Commission (IOSCO) or West Africa Regulators Association; or maintains a reciprocal agreement with Nigeria.
Where a foreign VASP satisfies either of these conditions, it must additionally fulfil at least one of the following requirements:
- It holds authorisation to conduct a similar business in its home jurisdiction;
- It originates from a jurisdiction with which the SEC has established regulatory arrangements concerning enforcement and supervision; or
- Its registration is deemed to be in Nigeria’s best interest, considering factors such as its area of specialisation, level of expertise, contribution to attracting investments in the capital market, and the extent of Nigerian participation in the capital market.
· Investment and Securities Act 2025
The ISA 2025 makes significant provisions concerning Virtual Asset Service Providers (VASPs). Pursuant to Section 3 of the Act, SEC is re-affirmed as the apex regulatory authority for the Nigerian capital market and the Act formally brings under regulatory oversight service providers operating in the virtual asset ecosystem, including Virtual Asset Service Providers (VASPs), Digital Asset Offering Platforms (DAOPs), and Digital Asset Exchanges. This means that such entities are now legally mandatorily obligated to register with and comply with the rules and regulations set forth by SEC.
Section 357, the Interpretation Section defines Securities to include virtual and digital assets and further expand the definition of a “securities exchange” or “registered exchange” now includes organized facilities that bring together buyers and sellers of not only traditional securities but also virtual assets, commodities and other financial products. This explicitly includes platforms facilitating the trade of virtual assets – VASPs.
Moreso, in Part 1 Second Schedule of the ISA 2025, virtual assets inclusive of digital assets and other distributed ledger technology (DLT) offers, tokens and products are recognised as types of investments and reinforces the need for VASPs to be under the regulatory ambits of SEC.
All of these provide a statutory basis for initiatives already undertaken by SEC such as ARIP, which has been used to provisionally licence some VASPs.
· CBN Guidelines
In December 2023, the Central Bank of Nigeria (CBN), in the exercise of its powers conferred by the Central Bank of Nigeria Act, 2007 and the Banks and Other Financial Institutions Act (BOFIA) 2020, issued the CBN Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPs) – FPRIDIRIPUBICIRIOO2IOO3. The guidelines were directed to institutions under its regulatory purview to regulate their relationship with Virtual Assets Service Providers in Nigeria.
The guidelines adopt similar definitions of a Virtual Asset Service Provider and Virtual Asset as those provided under the SEC Amended Rules. The overarching theme of the guidelines mandates all VASPs to operate a designated account with any Financial Institution regulated by the CBN for the purpose of carrying out their business activities involving virtual or digital assets.
A checklist of the requirement under the guidelines are:
1. The designated account shall only be opened with the approval of senior management of the Financial Institution, that is officers of the bank from the rank of Assistant General Manager (AGM) and above.
2. The VASP is to apply to the Financial Institution for the opening of designated bank account; the application is to be supported with the following documents:
a. evidence of a valid licence issued by the Securities and Exchange Commission (SEC) for the entity to engage in the business of VASP
b. certified true copy of the memorandum and article of association.
c. certified true copy Form CAC 2— Statement of share capital and return of allotment of shares.
d. certified true copy Form CAC 2.1 particulars of secretary.
e. certified true copy Form CAC 3—notice of registered address.
f. certified true copy Form CAC 7— Particulars of Directors.
g. verifiable registered address of the company.
h. copy of Certificate of Capital Importation (CCI) (where applicable)
i. valid means of identification of all the directors, principal officers and beneficial owners of the company.
j. BVN of all the directors, principal officers and beneficial owners of the company.
k. Home address of all the directors, principal officers and beneficial owners of the company.
l. AML, CFT and CPF Policy of the entity.
m. All other requirements of a corporate account in line with the CBN ODD Regulations
n. Any other requirement that the CBN may impose from time to time
3. Upon the opening of a designated bank account, the financial institution shall obtain authorisation from the CBN for the opening and operation of a non-interest bearing designated settlement account of the SEC’s VASPs entity.
Of utmost note are the following restriction on the use of the designated bank account:
1. An account opened in accordance with these Guidelines shall only be used for transactions on virtual/digital assets and not for any other purpose.
2. No cash withdrawal shall be allowed from the account.
3. No third-party cheque shall be cleared from the account except for settlement of a virtual/digital assets transaction which shall be done through a transfer to another designated account, withdrawal shall be only through a Managers’ Cheque or transfer to an account.
4. The account cannot be used to enter into concession arrangements with the financial institution.
The permissible actions of financial institutions when dealing with VASPs are limited to the following:
1. Opening of designated accounts.
2. Provide designated settlement accounts and settlement services.
3. Act as channels for FX flows and trade
4. Any other activity that may be permitted by the CBN from time to time
· Money Laundering (Prevention and Prohibition) Act, 2022
Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022 recognizes VASPs as financial institution and thus subject to the arrays of responsibilities imposed on financial institutions under the Act.
· Finance Act 2023
Finance Act of 2023 amended the Capital Gains Tax Act to classify digital assets, including cryptocurrency, as chargeable assets for the purpose of capital gains tax.
CONCLUSION
The regulatory approach, spearheaded by the Nigeria’s Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN), underscores the government’s commitment to fostering innovation while ensuring market integrity, investor protection, and financial stability is quite laudable considering the chequered history of cryptocurrency in Nigeria. In fact, at a December 2024 workshop, SEC voiced its commitment to accelerate the issuance of crypto licenses in 2025 as part of its efforts to regulate the cryptocurrency market and protect consumers. This indicate that crypto has come to stay in Nigera and hopefully by the end of the year 2025, more crypto startups will join Quidax and Busha, currently the only crypto startups with SEC provisional licenses.
Please do not treat the foregoing as legal advice as it only represents the public commentary views of the authors. All enquiries on this should please be directed at the authors.
