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Recently, President Tinubu enacted the Investment and Securities Act (ISA) 2025, thereby formally recognizing Bitcoin and other digital assets as securities.
Nigeria has frequently ranked among the top countries for Bitcoin adoption and peer-to-peer transactions, as detailed in Chainalaysis’ reports. However, until now, there have been no legal provisions acknowledging and regulating digital assets like Bitcoin.
This recent move signifies the first official acknowledgment of Bitcoin by Nigerian regulators, classifying it as a security, a designation some may consider inaccurate.
Nonetheless, this development offers essential regulatory clarity for the digital asset ecosystem, paving the way for innovation and investments to thrive.
The Investment and Securities Act (ISA) 2025
On March 29, the Nigerian government enacted the ISA 2025 as part of its comprehensive reform of the capital markets.
This Act repeals the previous 2007 Investments and Securities Act No. 29, updating the regulatory landscape governing capital markets in Nigeria to tackle current economic challenges and enhance the governance of the Nigerian Securities and Exchange Commission (SEC).
Overview of The Act
The new regulatory framework now categorizes digital assets as securities, placing them under the jurisdiction of the Nigerian SEC. The ISA introduces critical changes that enhance regulatory oversight, prioritize transparency, and boost investor protection while addressing fraud and aligning with global standards set by organizations like the International Organization of Securities Commissions (IOSCO).
Key Highlights of The Act
With ISA 2025, all virtual assets and investment contracts are acknowledged as securities, meaning that all Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges (DAEs) will be regulated by the Nigerian SEC. The aim is to bolster investor protection and prevent fraud in the digital asset sector.
Implications of the Regulation on the Bitcoin Ecosystem
This legalization of Bitcoin, alongside a transparent regulatory framework, allows companies to explore new financial services with reduced uncertainty. The Act grants market players additional avenues for recourse against fraudulent activities.
Bitcoin As A Security
While the ISA is a positive development for Bitcoin entrepreneurs in Nigeria, opinions remain divided regarding the potential drawbacks stemming from classifying Bitcoin as a security. Onionsman, CEO of Monierate, emphasizes that the regulatory requirements may hinder smaller innovators, potentially concentrating the market among well-capitalized firms.
Cost to Bitcoin Businesses
The transition for Bitcoin businesses involves formalizing operations by obtaining the necessary licenses from the Nigerian SEC and updating internal compliance structures. High compliance costs and operational challenges may deter new ventures, leading Bitcoin firms to navigate the new regulations cautiously.
Outlook for Bitcoin Companies in Nigeria
Veteran Nigerian Bitcoin founders view the ISA as a launching point for engaging with regulators. Bernard Parah of Bitnob highlights that the clarity provided by this regulation will facilitate future discussions to define Bitcoin’s distinction from other digital assets.
The trajectory of the Bitcoin ecosystem in Nigeria over the next decade will largely depend on this regulatory clarity and ongoing dialogue concerning the unique nature of Bitcoin. Ultimately, constructive regulations will enhance the ecosystem and foster innovation, thereby contributing to economic development in this emerging global sector.
As Heritage Falodun aptly noted, these adjustments are essential for advancing how Africans engage in global value transfer, marking a significant new era for Bitcoin in Nigeria.
Disclaimer: Bitnob is a Recursive Capital portfolio company.
