What the Investments and Securities Act means for Nigeria’s crypto

On March 25, 2025, Nigeria took a decisive step toward regulating its fast-growing cryptocurrency sector. President Bola Tinubu signed the long-awaited Investments and Securities Act (2025), replacing the outdated 2007 version. Buried in the 226-page document is a landmark provision: digital assets are now recognised as securities. 

The new law marks the clearest regulatory framework Nigeria has ever given the sector. It gives the Securities and Exchange Commission (SEC) wide-ranging authority over the issuance, trading, and promotion of digital assets, legalising crypto under capital market rules. 

The SEC can now monitor the activities of securities exchanges, conduct audits, impose penalties, suspend company operations, and even remove their executives. While the law legitimises crypto, questions linger over how its enforcement will unfold.

A framework years in the making

Crypto’s legal status in Nigeria has long been murky. In 2021, the Central Bank of Nigeria (CBN) barred banks from processing crypto-related transactions, effectively shutting crypto startups out of the formal financial system. Startups adapted by routing payments through offshore banking partners or pivoting to peer-to-peer (P2P) models.

The SEC issued sporadic circulars and launched the Accelerated Regulatory Incubation Programme (ARIP) in June 2024—a regulatory sandbox—but Nigeria never formalised a comprehensive framework until now.

Under the ISA 2025, a digital asset is “a digital token that represents assets such as a debt or equity claim on the issuer” and includes any asset issued on a blockchain. This definition captures cryptocurrencies like Bitcoin and Ether, stablecoins, security tokens, and potentially tokenised real-world assets used as investments or that hold trading value.

The Act also grants the SEC oversight of token issuers, including meme coin creators and projects raising funds through utility or investment-based coins (initial coin offerings). Creating and promoting tokens with trading value or intended to act as stores of value will now face tighter regulatory scrutiny.

Implications for startups and foreign operators

Before the ISA was signed into law, the SEC mandated digital asset exchanges and foreign operators to set up a physical presence in Nigeria to ensure closer supervision. With full regulatory backing now in place, that requirement is likely to be enforced more firmly. This raises concerns for local startups that rely heavily on foreign infrastructure providers like Stellar, Ethereum, Solana, Polygon, and developer tools such as Alchemy or Infura.

Web3 startups like Sytemap, a Nigerian Web3 real estate marketplace, use the Stellar blockchain to store property and transaction records. Others rely on foreign APIs and infrastructure to provide crypto wallets, blockchain payments, run analytics, and manage core backend services. 

Startups build their decentralised finance (DeFi) apps on low-cost blockchains like Stellar. They also integrate stablecoins like USDC and USDT by connecting to the infrastructure provided by Circle and Tether, two of the world’s largest stablecoin providers. Foreign infrastructure providers offer the building blocks that make local startups viable.

But the need for local compliance by these foreign infrastructure providers will ultimately depend on how the SEC enforces its mandate. If the regulator imposes strict requirements on foreign players, it could trigger resistance, potentially affecting local developers who rely on their tools and networks.

“We built our tech stack on Stellar because of the immutability advantage, plus we wanted to limit how often we move things around,” said Ndifreke Ikokpu, CTO and co-founder of Sytemap, a Nigerian blockchain-based real estate marketplace. “We are compliant with local consumer and data privacy laws, but the provisions of the Act don’t quite apply to us now, unless we start trading. And that’s not something we’re thinking about.”

Some of these blockchain networks, like Stellar, which funds Nigerian Web3 startups through its Stellar Development Foundation scheme, Sui, Solana, and Lisk, provide funding to Nigerian Web3 builders, which have been crucial alternative sources of funding during slowdowns.

Yet, regulating foreign blockchain infrastructure players is a two-sided coin. 

The Stellar blockchain has a utility token called $XLM. If $XLM is classified as a ‘security’ in Nigeria, based on the SEC’s definition, compliance obligations would generally fall on several parties. 

Crypto exchanges that facilitate the buying, selling, or trading of $XLM would be classified as securities exchanges and must comply with local laws. Retail investors could be paying tax on capital gains—profits made from selling assets like $XLM at a higher price than they bought it—if the tax bill for digital assets goes through.

But if Stellar itself issues or promotes its coin to Nigerian retail investors, it would also be subject to local compliance.

“It’s a cost versus benefit thing,” said Timothy Mark-Ugwumba, a Web3 and fintech compliance manager. “If these foreign players see that they’re benefitting more from the ecosystem, they’ll come in. But we obviously need them.”

Smaller crypto startups could be left out

The law still leaves grey areas. First, it doesn’t clearly define how non-trading platforms like prediction markets, crudely called “crypto gambling platforms,” and Web3 gaming apps using tokens will be treated. Without clearer guidance, startups risk unintentionally violating securities laws.

“The risk of overregulation exists if frameworks are applied rigidly or without adequate consultation, particularly for startups and early-stage innovators,” said Ayotunde Alabi, CEO of Luno Nigeria, a local crypto exchange.

Second, while the Act empowers the SEC to create regulatory sandboxes and licence operators, existing mechanisms like its ARIP still face bottlenecks.  The cost of applying for ARIP is over ₦2 million ($1,245), and costs could rise as startups go through additional regulatory steps. 

Recent due diligence audits, by regulators and startups, have exposed gaps in how crypto platforms monitor transactions. In response, the SEC mandated operators to adopt Chainalysis, a blockchain analytics tool, to monitor transactions and strengthen compliance. This increases operational expenses for smaller players, making it difficult for them to participate.

This is where a tiered licencing system, like the one used in traditional finance, could be useful. Without it, regulators risk regulating every crypto startup like a full-fledged fintech or bank. This is counter-productive because, unlike traditional finance, crypto and digital assets have not hit the critical mass market that drives the kind of demand seen with banking solutions and fintechs. As a result, this expectation could be unrealistic and possibly become a blocker.

“The ISA may lead to innovation concentration among a few licenced players, especially if licencing becomes costly and selectively applied,” said Mark-Ugwumba. “The SEC’s ₦500 million ($311,000) capital requirement, for example, could block out startups that actually have promising solutions.”

He adds that the Act places nearly the same compliance burden on startups as on banks. But unlike banks, crypto startups don’t have the same capital or access to expertise. The absence of a tiered system means smaller players could be squeezed out before they even get a chance.

Restoring institutional investor confidence

Trust is the foundation of any financial system, and in Nigeria’s crypto sector, it has been strained.

In 2024, Nigeria was locked in a regulatory tussle with Binance, a foreign crypto exchange, which led to tighter scrutiny across the entire sector and prompted other exchanges like KuCoin and OKX to exit the market. The standoff rattled users and reduced transaction volumes as Binance locked Nigerians out of its system. This pushed users toward other crypto platforms like Bybit, Bitget, and local exchanges.

While this shift presented an opportunity for local crypto startups to win back customers from foreign operators, the lack of clarity around crypto and P2P trading became a blocker. Coupled with the crypto market downturn in early 2024, Nigerians were cautious; they weren’t transacting crypto, and this squeezed revenue for startups. 

Funding has also been a bane for African Web3 startups. While there has been a decline globally, foreign exchanges have typically raised more money than homegrown players, which continue to struggle to raise capital.

Some Web3 startups often branch out of VC domain to seek alternative funding routes. For example, Scorefam, a Nigerian sports-based gaming startup, raised $25 million in 2022 through an initial coin offering (ICO). In total, African blockchain startups received $135 million in 2023—about 4.2% of the total funding—and by H1 2024, they were on track to receive less than this amount.

What could change the tide is regulatory clarity. The new Investments and Securities Act (ISA) gives Nigeria’s SEC the power to demand white papers, enforce disclosures, and set caps on retail crypto investments. These rules bring transparency and structure, helping restore trust among cautious investors and increasing demand for crypto.

“Investor confidence is about perception as much as policy,” says Mark-Ugwumba. “Many investors don’t fully understand the tech, but they need to know their investment won’t be wiped out overnight by regulatory action. The ISA introduces protections like client fund segregation and promoter due diligence, which traditional investors look for.”

With the demand for crypto reaching the mass market, it will increase revenue for startups. That, in turn, could reignite institutional interest. 

Active Web3 investors, like Adaverse, which has slowed its funding in the past year, told TechCabal it remains “optimistic about clearer crypto regulations across Africa.”

NFTs and prediction markets still need clarity

One of the least discussed areas is how the law treats digital assets that aren’t tied to trading. Take non-fungible tokens (NFTs), for example. Though NFTs have not been classified as digital assets, they could qualify as such under the ISA if they represent investment opportunities. 

A collectible NFT tied to artwork may not need registration. But if it is fractionalised or tied to profit-sharing, like club and society-based NFTs, which hold special investment rights, it will be regulated.

In the past, Nigerian musicians have issued NFTs as a way to sell music rights or limited merchandise. If done as collectibles, they fall outside the SEC’s radar. But if positioned as income-generating assets, they could be seen as securities.

Prediction markets also have the air of regulatory uncertainty around them. These platforms allow users to bet on outcomes, from football scores to elections. Soccersm and Scorefam are examples in Nigeria. 

Globally, regulators have debated the legality of prediction markets. The US classifies them as derivative contracts, which places them under the regulatory purview of the Commodity Futures Trading Commission (CFTC).

In Nigeria, the SEC oversees all commodity exchanges and derivatives trading. However, the regulator hasn’t said much about regulating crypto prediction markets. The director general, Emomotimi Agama, noted on a stakeholder engagement call on April 14 that the Commission plans to gradually engage with more nuanced platforms like these, starting with the most obvious trading-focused ones.

“Once NFTs form within our purview, they will be dealt with according to the rules and regulations,” said Agama on the call. “The ISA provides a broad law, and under the broad law, we will create specifics that will deal with innovations in crypto.”

How fast will things move?

Execution will be gradual. The SEC only recently began actively engaging with startups through the ARIP, and a freeze on provisional crypto licences in April still highlights internal learning gaps.

Comparatively, South Africa’s Financial Sector Conduct Authority (FSCA) has made more progress by working slowly and collaboratively with the sector. Nigeria is already on this path, aiming to gain a deeper understanding of blockchain technology. 

The ISA is not fully formed or clear about how all parts of the crypto sector will be treated yet. But it is the strongest signal that Nigeria is serious about building a stable, responsible digital asset ecosystem. For a sector used to uncertainty, that’s a very big win.