ABSTRACT
This article explores the transformative legal recognition of virtual assets as securities under Nigeria’s Investment and Securities Act, 2024 (ISA 2024)[1]. It particularly focuses on Section 350 of the Act. In this article, critical analysis on the statutory framework introduced by the Act is explained together with its implications for virtual asset regulation, exchange operations, dealer obligations, and derivatives. Through comparative insights and policy reflections, this article evaluates how this development positions Nigeria within the evolving global digital asset regulatory landscape.
INTRODUCTION
The regulatory landscape for virtual assets in Nigeria has undergone a landmark transformation with the enactment of the Investment and Securities Act, 2024 (“ISA 2024”). One of the most consequential features of this legislation is its express recognition of virtual assets as securities, a significant development that aligns Nigeria with evolving global standards and paves the way for structured legal and regulatory oversight of the virtual asset ecosystem.
Therefore, this article offers a legal interpretation of key provisions of ISA 2024, particularly Section 350 of the Act, which expands the definition of “securities” to include “virtual assets.” Through statutory analysis and contextual understanding, this article explores the scope and implications of this inclusion, with reference to other related definitions such as “securities exchange,” “securities dealer,” and “derivatives.”
VIRTUAL ASSETS AS SECURITIES
Section 350 of ISA 2024 provides an inclusive definition of the term “securities.” Crucially, paragraph (d) of the definition of ”securities” states as follows:
“Securities” among others means —
(d) virtual assets;
This concise yet powerful inclusion signifies that virtual assets which are commonly understood to include cryptocurrencies, coins/tokens, and other digital assets, are now formally classified as securities under Nigerian law. This has far-reaching consequences for the regulatory jurisdiction of the Securities and Exchange Commission (SEC) and the legal obligations of Virtual Asset Service Providers (VASPs) operating within the country.
It is important to note that this definition lays the groundwork for interpreting a broad range of digital asset transactions as falling within the purview of securities regulation, subjecting such activities to oversight and enforcement by the SEC. This aligns with the SEC’s 2022 Rules on Issuance, Offering Platforms, and Custody of Digital Assets[2], which anticipated regulatory authority over digital tokens and exchanges.
EXPANDING THE REGULATORY NET: EXCHANGES, DEALERS, AND INFRASTRUCTURE
a. Securities Exchange or Registered Exchange
The ISA defines a “securities exchange” as:
“…an organised facility which maintains and provides infrastructure for bringing together buyers and sellers of securities, virtual assets, commodities, and/or financial products…”
This wording ensures that both traditional and virtual asset exchanges (including crypto trading platforms) fall under the same regulatory architecture. Thus, platforms facilitating peer-to-peer crypto trading or centralized crypto exchanges may now be treated as registered exchanges, subject to licensing, compliance, and reporting requirements.
The inclusion of virtual assets in this definition means platforms like Luno, Bitget, and potentially Bybit, if operating within jurisdictional bound of Nigeria, must now register as recognized exchanges and comply with the disclosure, conduct, and investor protection standards mandated by the SEC[3].
b. Securities Dealer
Similarly, the Act defines a securities dealer as any firm that is a member of an exchange and is engaged in transacting in securities (including virtual assets) either on its own account or on behalf of others. This definition brings crypto trading firms, brokers, and OTC desks squarely within the scope of regulated financial intermediaries.
Firms engaging in proprietary crypto trading or acting as intermediaries for client transactions must now register and adhere to judicious, capital adequacy, and reporting requirements, much like traditional stockbroking firms[4].
c. Derivatives and Virtual Assets
The definition of “derivatives” in the Act also references contracts derived from an “underlying interest”, a term that now legally includes virtual assets. This suggests that crypto-based options, futures, and swaps fall under the purview of securities law, opening the door to regulated derivatives markets for digital assets in Nigeria.
With this, products such as perpetual futures contracts, tokenized yield agreements, and synthetic asset contracts offered on DeFi platforms or centralized exchanges may now be interpreted as derivatives subject to SEC oversight[5].
SIGNIFICANCE OF THE POLICY
With the inclusion of Virtual Assets as Securities as provided under Section 305 of the Act, this development builds upon earlier regulatory efforts, including the 2020 SEC Statement on Digital Assets and the 2022 Digital Asset Rules, and cements a comprehensive statutory foundation for digital asset regulation in Nigeria. By explicitly including virtual assets within the scope of securities, with the enactment of ISA 2024 many significances are sought to be achieved, few out of those significances are:
1. The Act establishes legal certainty for participants in the crypto space as regards to regulation and compliance,
2. It empowers the Nigerian Securities and Exchange Commission (SEC) to regulate the rapidly growing cryptocurrency industry,
3. It plays a major role in aligning digital assets regulation in Nigeria with international best practices, such as those seen in jurisdictions like the U.S. (via the SEC and CFTC), the EU (via MiCA), and South Africa (via the FSCA’s designation of crypto as a financial product)[6],
4. It also provides a framework for innovation while protecting investors and maintaining market integrity.
LEGAL AND PRACTICAL IMPLICATIONS
To ensure proper compliance with the Act, there are some certain practical implications. These provisions will require existing crypto operators to regularize their operations, adopt best practices in cybersecurity and governance, and undergo regulatory audits where applicable. They are highlighted as follows:
1. Mandatory registration for exchanges and VASPs under SEC guidelines
2. Licensing requirements for dealers, advisors, and portfolio managers in the crypto space
3. Enhanced investor protections and dispute resolution mechanisms
4. Tax and anti-money laundering compliance obligations
CONCLUSION
The Investment and Securities Act, 2024 makes a paradigm shift in the use, recognition, regulation and compliance of virtual assets in Nigeria. By defining “securities” to include virtual assets, the Act provides a clear and authoritative basis for regulation, enforcement, and legal recognition. For legal practitioners, policymakers, and market participants, this development demands close attention, robust compliance strategies, and forward-thinking adaptation to a digitized financial future.
It is expected that the SEC will issue accompanying regulations or amendments to existing rules to harmonize the provisions of the ISA 2024 with current compliance structures and to provide transitional guidelines for legacy market participants.
REFERENCES
[1] Hereinafter referred to as “The Act” [2] Securities and Exchange Commission (SEC) Nigeria, Rules on Issuance, Offering Platforms and Custody of Digital Assets, 2022. [3] Investment and Securities Act, 2024, Section 350, Section on ”securities”. [4] SEC Nigeria Guidelines for Capital Market Operators, 2021. [5] ISA 2024, Definition of “Derivative” under Part XX. [6] MiCA (Markets in Crypto-Assets Regulation), EU Parliament 2023; FSCA Press Release on Crypto Asset Classification, South Africa, 2022.ABOUT THE AUHTOR
Uthman Olayemi Badmus is a final year law student of Bayero University, Kano. He is interested in corporate law practice, Web3 & digital assets regulation and compliance. To reach him, email: [email protected] or contact/whatsApp: 09061765044.