Introduction
The Investment and Securities Act (ISA) 2025 was enacted on March 31, 2025 by President Bola Ahmed Tinubu to replace the previous ISA, updating the law with provisions impacting emerging trends, global standards and recent developments in the Nigerian Capital Market.
In particular, the introduction of these provisions and changes in the ISA holds significant impact on the ownership and use of digital and virtual assets such as cryptocurrencies, tokens, amongst others.
In this newsletter, therefore, we highlight the relevant provisions of the ISA, 2025 and their impact.
1. Recognition of the right of ownership and use of Virtual and Digital Assets:
Notably, among other changes introduced by the ISA 2025 is the expansion of the scope of what the law defines as "securities". Previously, Securities under the ISA were classified as assets which could be acquired, transferred, or traded solely in relation to bonds, stock, debentures, shares, and other traditional instruments.
However, section 357 of the ISA 2025 expands the definition of Securities to include virtual and digital assets. Therefore, virtual and digital assets such as cryptocurrencies, Non-Fungible Tokens (NFTs), digital currencies and other digital representation of value can now be lawfully owned, transferred, digitally traded and used for payment or investment purposes in Nigeria.
Similarly, the ISA now recognizes Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges as capital market operators as being within the regulatory purview and oversight of the Securities and Exchange Commission ("SEC").
2. Legal Protection for Owners, Innovators and Investors in Virtual and Digital Assets
Prior to the ISA 2025, investors, innovators, businesses and individuals who sought to deal in virtual and digital assets were skeptical about the legality of ownership and trading in digital and virtual assets in Nigeria.
Specifically, key regulators like the Central Bank of Nigeria (CBN), prohibited financial institutions from providing banking and financial services support to any transaction related to virtual and digital assets. This situation prevented innovators from creating new financial products and services centered around virtual and digital assets
The emergence of ISA 2025 which grants the Securities and Exchange Commission (SEC) authority to regulate virtual and digital asset market activities now opens more opportunity to investors and innovators to confidently create new financial products and services in Nigeria's rapidly evolving digital economy. Consequently, investors and innovators have the assurance of regulatory protection of their investments in virtual and digital assets in Nigeria.
Furthermore, exchanges, trading platforms, brokers, and other crypto service providers must now register with the SEC and obtain the appropriate licenses before commencing operations. These entities must also implement robust anti-money laundering (AML), counter terrorism financing (CFT) and know-your-customer (KYC) measures, similar to banking and non-banking financial institutions, thereby curbing fraudulent financial activities within the sector.
3. Diversification and Expansion of the Nigeria Capital Market
Virtual and digital assets hold the potential of diversifying and expanding investment opportunities in Nigeria. The ISA 2025, has made the Nigeria capital market appealing to the younger demography who might have been significantly uninterested in the traditional capital market in Nigeria.
The statutory recognition and legalization of virtual and digital assets, introduces new investment opportunities and improves portfolio diversification by stakeholders in the Nigeria capital market.
Prior to the ISA 2025, there were no categories or classification of securities exchanges. However, the ISA 2025 now classifies securities exchanges as either Composite Securities Exchanges or Non-composite Securities Exchanges.
Composite Securities Exchanges are permitted to facilitate the listing and trading of all types of securities, products, commodities, or financial instruments while Non-composite Securities Exchanges specialize in the listing of only one type of securities or commodities (known as mono securities exchanges) or serve as an alternative trading system that brings together orders from buyers and sellers either physically or online.
This distinction accommodates virtual and digital asset exchanges because the definition of "securities exchange" was expanded by the ISA 2025, to include organized facilities which provide infrastructures for the offer, bids, and trading of virtual and digital assets for transaction purposes.
By this definition, platforms established, even if only for facilitating crypto and other digital and virtual asset transactions, including peer-to-peer transactions, are now classified as exchanges, and are now required to be registered with the SEC.
Conclusion
The ISA 2025 has significantly impacted the ownership and use of virtual and digital assets in Nigeria. The ISA 2025 provides an entry into a fully digital, integrated and all-embracing financial market. The Act by providing a definitive legal position and regulatory framework for fintech investors, innovators and other capital market participants has resolved all controversies over the legality of investing in virtual and digital assets, therefore encouraging ownership, investment and innovation in virtual and digital assets.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
