THE LEGAL LANDSCAPE FOR VIRTUAL ASSETS IN NIGERIA: AN EXAMINATION OF THE INVESTMENT AND SECURITIES ACT, 2025 AND THE NTAA 2025

Abstract

Nigeria’s virtual asset regulatory framework has undergone significant transformation with the enactment of the Investments and Securities Act 2025 (ISA 2025) and the Nigeria Tax Administration Act 2025 (NTAA 2025), complemented by recent regulatory guidelines and proposed rules. This paper examines the emerging legal and regulatory framework governing virtual assets in Nigeria, with particular focus on asset classification, regulatory oversight, taxation, licensing, investor protection and enforcement. It evaluates the interaction between the capital-market and tax regimes and identifies key challenges, including high capital requirements for local operators, overlapping regulatory mandates and the limited enforceability of rules against decentralized and peer-to-peer transactions. The paper argues that while the reforms provide a more structured and comprehensive basis for regulating virtual assets, their effectiveness will ultimately depend on regulatory coordination, proportionate compliance requirements and the ability of regulators to address the decentralized nature of virtual asset markets.

Keywords: Virtual Assets; Cryptocurrency; Virtual Asset Service Providers; Digital Assets.

Introduction

Nigeria's approach to virtual assets has evolved considerably from regulatory uncertainty and restrictions on cryptocurrency-related banking activities towards a more structured statutory framework. The Securities and Exchange Commission (“SEC”) had begun developing a digital-asset regime before the enactment of the present legislation, but the Investments and Securities Act 2025 (“ISA 2025”) and the Nigeria Tax Administration Act 2025 (“NTAA 2025”) now provide the principal legislative foundation for the regulation and taxation of virtual assets in Nigeria.

The ISA 2025 expressly incorporates virtual and digital assets into the statutory concept of securities and empowers the SEC to regulate digital and virtual asset services. The NTAA 2025, particularly its Fifth Schedule, establishes administrative requirements concerning registration, taxable transactions, valuation, record-keeping and reporting. The Nigeria Tax Act 2025 is also relevant because the NTAA principally provides the administrative machinery through which tax obligations are implemented.

The Presidential Executive Order on Virtual Assets provides a framework for coordination among the agencies regulating the sector. It establishes a Virtual Asset Council chaired by the CBN, with the NRS and SEC as vice-chairs, while retaining each agency’s existing mandate. Under the framework, virtual assets that qualify as securities and related investment activities fall under the SEC, while payment, settlement, custody and related services involving non-security virtual assets fall under the CBN. Where it is unclear which agency has responsibility, the Virtual Asset Council will determine the appropriate regulator. The Order also directs the NRS to develop a tax policy for the sector.

The framework has continued to develop in 2026 through the Joint Revenue Board's Guidelines on Taxation of Virtual Assets, and the SEC's proposed Rules on Digital and Virtual Assets Operations, Custody and Markets. The SEC's proposed Rules, published on 20 August 2026, remain subject to stakeholder consultation and have not yet come into force.

This article examines the principal features of this emerging framework, its interaction with taxation, and the challenges that remain in achieving effective regulation of a decentralized and increasingly cross-border market.

Evolution of Virtual Asset Regulation in Nigeria

The regulatory history is important to understanding the significance of the 2025 reforms. In February 2021, the Central Bank of Nigeria (“CBN”) directed banks and other financial institutions to identify and close accounts operated by persons or entities involved in cryptocurrency exchange transactions. The restriction did not eliminate cryptocurrency activity; rather, users increasingly resorted to peer-to-peer arrangements and other channels outside the conventional banking system.

The legal uncertainty surrounding the 2021 approach was tested judicially in Governor of the Central Bank of Nigeria v Rise Vest Technologies Ltd & Ors, Suit No. FHC/ABJ/CS/822/2021, decided by the Federal High Court, Abuja, on 18 October 2021. The CBN had obtained an interim order freezing the bank accounts of Rise Vest and other entities in connection with alleged cryptocurrency transactions. The Court subsequently discharged the freezing order, holding, in substance, that the CBN could not rely on its February 2021 circular as the legal basis for treating cryptocurrency dealings as unlawful. The Court emphasized the principle that conduct attracting legal sanction must be grounded in written law; a circular, standing alone, could not create an offence.

The significance of Rise Vest lies less in establishing that cryptocurrency is wholly beyond regulation and more in emphasizing the importance of statutory authority and regulatory certainty. It provides an important backdrop to the ISA 2025, which now expressly provides a statutory basis for regulating virtual and digital assets.

The subsequent decision in Nwaorgu v First Bank of Nigeria Plc (Suit No. NICN/LA/437/2021, Unreported), decided on 10 July 2024, demonstrates a more nuanced position. The claimant, a bank employee, challenged his dismissal arising from cryptocurrency transactions undertaken contrary to CBN directives and the bank's internal instructions. The National Industrial Court distinguished Rise Vest, holding that the issue before it was not whether cryptocurrency trading constituted a criminal offence, but whether the employee had disobeyed a lawful and reasonable instruction of his employer. The Court upheld the dismissal.

The two decisions illustrate an important distinction: the absence of a general statutory prohibition on cryptocurrency does not mean that cryptocurrency-related activities are free from regulatory, contractual, employment or institutional restrictions. This distinction is particularly relevant under the current regime, where virtual assets are expressly brought within a statutory regulatory framework.

The 2024 Binance proceedings further exposed the practical difficulty of regulating large offshore platforms serving Nigerian users without a conventional Nigerian presence. The proceedings raised questions concerning regulatory jurisdiction, taxation, enforcement and the ability of Nigerian authorities to impose obligations on foreign digital platforms. These issues remain relevant under the current framework.

The subsequent CBN Guidelines of December 2023 marked a movement away from the 2021 exclusionary approach by permitting financial institutions to provide banking services to regulated Virtual Asset Service Providers (“VASPs”), subject to specified controls. The ISA 2025 and NTAA 2025 consequently represent a further transition from restriction and uncertainty towards regulated participation and taxation.

The Investment and Securities Act 2025

Classification of Virtual Assets

A significant development under the ISA 2025 is the express inclusion of virtual and digital assets within the statutory definition of securities. Section 357 defines “securities” to include virtual and digital assets, while the Second Schedule separately identifies virtual assets, digital assets and other distributed-ledger-technology products as investments.

This does not, however, mean that every virtual asset will automatically receive identical regulatory treatment. The NTAA 2025 recognizes a more specific classification approach, including factors such as investment of money or other assets, a common enterprise, an expectation of profit and profit derived from the efforts of a promoter or third party.

Consequently, the legal treatment of utility tokens, governance tokens, stablecoins and tokenised real-world assets should be determined by reference to their structure, rights, economic function and the applicable regulatory instrument rather than by their labels alone.

SEC Jurisdiction and Rule-Making Powers

Section 355(1)(n) empowers the SEC to make rules concerning digital and virtual asset services and related activities, while Sections 73 and 80 confer inspection and investigative powers. The Act also anticipates specialized enforcement mechanisms, including provisions relating to confiscation wallets, multi-party combination wallets and the domestication of private keys.

The SEC is nevertheless not the sole institution with an interest in virtual assets. The 2026 Virtual Assets Coordination Executive Order seeks greater coordination among the SEC, CBN, Nigeria Revenue Service (“NRS”) and other relevant authorities. The regulatory framework is therefore best understood as multi-agency and function-based, rather than as one in which a single regulator exercises exclusive control over every aspect of virtual-asset activity.

The SEC's Proposed Regulatory Framework

The SEC's proposed Rules on Digital and Virtual Assets Operations, Custody and Markets seek to give operational effect to the ISA 2025. They address issuance and offering, tokenisation, trading, custody, transfer and settlement, investment and advisory services, and propose to cover persons operating in Nigeria, providing services to Nigerian residents or targeting Nigerian investors through digital channels.

The proposed framework creates different categories of operators, including Digital Asset Exchanges, Digital Asset Custodians, Digital Asset Offering Platforms, Real-World Asset Tokenisation Platforms and other VASPs. It also proposes substantial capital requirements, including ₦2 billion for Digital Asset Exchanges and Custodians, ₦500 million for certain categories and ₦200 million for general VASPs.

These requirements may enhance prudential resilience but could also create significant barriers to entry for indigenous fintech businesses. High capital thresholds may favour established financial institutions and well-funded foreign operators, potentially undermining domestic innovation.

The proposed Rules also impose Nigerian incorporation, physical-presence and resident-officer requirements. These provisions appear responsive to the difficulties highlighted by the Binance episode and seek to ensure that foreign operators targeting the Nigerian market have identifiable entities and responsible officers within the Commission's jurisdiction.

Investor-protection measures include risk disclosures, suitability assessments, retail investment limits and a five-day cooling-off period. Custodians must also maintain a significant proportion of client assets in cold storage.

The difficulty, however, is enforcement. A substantial proportion of cryptocurrency transactions occur through peer-to-peer marketplaces, decentralized exchanges and self-hosted wallets. Traditional regulatory tools such as investment limits, custody requirements and transaction monitoring are considerably harder to enforce where there is no centralized intermediary.

Taxation under the NTAA 2025

The NTAA 2025 introduces specific administrative mechanisms for virtual assets, supplemented by the NRS Guidelines on Taxation of Virtual Assets published on 31 July 2026. The Guidelines classify virtual assets into categories reflecting their economic characteristics, including cryptocurrencies, stablecoins, investment tokens, utility and governance tokens, NFTs and sovereign digital currencies.

A notable feature is the dollar-referenced methodology for calculating gains. The methodology seeks to distinguish genuine economic gains from gains attributable merely to fluctuations in the value of the naira. Virtual-asset transactions such as token-to-token swaps, staking rewards, mining rewards and certain airdrops may also trigger tax consequences.

The framework imposes significant compliance responsibilities on VASPs. Registered platforms may be required to withhold tax, collect stamp duty, charge VAT on relevant fees and maintain transaction records. The framework also introduces substantial penalties for registration, filing and withholding failures.

The principal enforcement difficulty arises with direct wallet-to-wallet transactions conducted outside regulated platforms. In such cases, the tax authority must rely substantially on self-assessment and subsequent audit rather than automated withholding or collection. This creates a significant disparity between the regulatory visibility of compliant exchanges and that of decentralized or informal transactions.

Interaction of the Regulatory and Tax Frameworks

The ISA 2025 and NTAA 2025 establish complementary but potentially overlapping regulatory responsibilities. For example, tax-registration requirements for VASPs can complement SEC customer-identification and KYC requirements, creating a mechanism through which virtual-asset users are brought within the formal tax system.

However, multiple regulatory authorities may impose different reporting, monitoring and technological requirements. Stablecoins illustrate this challenge particularly well, as the same asset may attract capital-market, tax and payment-related regulatory considerations. Effective inter-agency coordination will therefore be essential to prevent regulatory duplication and uncertainty.

Key Regulatory Challenges

Two principal structural challenges emerge.

First, high compliance and capital requirements may disproportionately affect indigenous operators. While prudential requirements can protect investors, excessive entry barriers may concentrate the formal market in the hands of foreign-funded platforms and established financial institutions.

Second, decentralization limits conventional enforcement. The regulatory framework depends heavily on identifiable corporate intermediaries, yet genuinely decentralized protocols may have no identifiable operator, physical office or controlling executive. Where users migrate towards decentralized exchanges and self-hosted wallets, regulatory and tax authorities may find it difficult to impose conventional registration, withholding, custody and reporting obligations.

These challenges echo the lesson from Rise Vest: effective regulation requires not merely regulatory ambition but clear legal authority, institutional competence and an enforcement mechanism capable of reaching the conduct being regulated. At the same time, Nwaorgu demonstrates that regulatory obligations can operate through other legal relationships even where the underlying activity is not itself criminal.

Implications for Legal Practitioners and Market Participants

The regulatory shift makes virtual-asset compliance increasingly important for businesses, investors and professional advisers. Operators should assess their licensing category, capital requirements, tax-registration obligations, reporting systems, custody arrangements and Nigerian-presence requirements.

Clients trading or holding virtual assets should maintain accurate and independently verifiable records of acquisitions, disposals, swaps and other transactions. VASPs should also prepare for withholding, VAT, stamp-duty, reporting and record-keeping obligations.

Legal practitioners should further distinguish between what is prohibited, what is regulated and what is merely subject to contractual or institutional restrictions. This distinction, illustrated by Rise Vest and Nwaorgu, remains important when advising clients on the legal consequences of virtual-asset activity.

Conclusion

Nigeria has moved from an uncertain and predominantly restrictive approach to virtual assets towards a more comprehensive statutory regime. The ISA 2025 establishes a capital-market framework, while the NTAA 2025 and subsequent tax guidelines provide mechanisms for bringing virtual-asset transactions within the tax system. The SEC's proposed Rules seek to translate the statutory framework into detailed requirements for issuance, trading, custody and other virtual-asset services.

The judicial authorities provide important context for this development. Rise Vest underscores the need for statutory authority before regulatory measures can impose legal sanctions, while Nwaorgu demonstrates that the absence of a general criminal prohibition does not prevent lawful institutional restrictions on cryptocurrency-related conduct. The Binance proceedings, meanwhile, highlight the continuing difficulty of regulating offshore platforms serving Nigerian users.

The principal challenge is therefore no longer simply whether Nigeria can regulate virtual assets, but whether the regulatory framework can achieve effective, proportionate and enforceable regulation without driving legitimate activity into less visible decentralized and peer-to-peer markets. High capital requirements, multiple regulatory obligations and the practical limits of decentralized enforcement must therefore be carefully managed. The success of Nigeria's emerging framework will ultimately depend on regulatory coordination, proportionate compliance requirements and the capacity of enforcement mechanisms to adapt to the technological structure of virtual assets.