The Evolution of Digital Asset Governance in Nigeria: A strategic guide for virtual asset service providers (VASPs)

INTRODUCTION

Nigeria’s digital economy is currently navigating a pivotal transition. What began as a fragmented landscape of peer-to-peer activity has matured into a sophisticated and multi-tiered regulatory ecosystem. Central to this evolution are the Virtual Asset Regulatory Council (VARC) and the Securities and Exchange Commission (SEC), which now provide the definitive framework for the operation of virtual assets in Nigeria.

For Virtual Asset Service Providers (VASPs), which are entities facilitating the exchange, transfer, safekeeping, or administration of digital assets, the era of regulatory ambiguity has ended. In its place is a rigorous well-structured and compliance regime designed to align Nigeria with global financial standards and protect the integrity of the national financial system.

Nigeria’s Emerging Regulatory Architecture for Digital Assets

The foundation of the current regime rests on the New Rules on Issuance, Offering Platforms and Custody of Digital Assets 2022, now reinforced by the Investments and Securities Act, 2025 (ISA). This landmark legislation formally recognizes digital assets as securities, bringing them squarely under the ambit of the Securities and Exchange Commission as the apex regulator of the capital markets.

Under these rules, the Securities and Exchange Commission treats all virtual asset investments as securities unless proven otherwise. The scope is broad, capturing all platforms that facilitate the trading, exchange, or transfer of virtual assets, as well as foreign or non-resident operators that actively target Nigerian investors through digital promotions or direct solicitations.

Regulatory Entry Requirements for Virtual Asset Service Providers

To operate legally within the Nigerian market, a Virtual Asset Service Provider must transition from an informal platform into a fully institutionalized entity. The onboarding pathway begins with the Accelerated Regulatory Incubation Program (ARIP), a mandatory twelve-month (12) sandbox designed to assess business models before full licensing.

This process starts with an Initial Assessment Filing, requiring the submission of a draft White Paper which must provide a detailed schematic of the system architecture, security protocols, and the unique value proposition of the digital asset project.

Financial resilience is a fundamental pillar of the registration process. Accordingly, the Securities and Exchange Commission on 16^th January 2026 issued the Circular titled ‘Revised Minimum Capital (MC) for Regulated Capital Market Entities, which introduced revised minimum capital requirements to ensure market stability:

I. Digital Assets Exchanges (DAX) and Custodians: ₦2 Billion.

II. Digital Assets Offering Platforms (DAOP): ₦1 Billion.

III. Digital Assets Intermediaries (DAI): ₦500 Million.

To provide an additional layer of investor protection, every provider is required to maintain a current Fidelity Bond covering at least twenty five percent (25%) of the minimum paid-up capital. This insurance serves as a critical safety net against internal fraud, professional negligence, or other institutional defaults.

The Securities and Exchange Commission mandates that every applicant be a company incorporated in Nigeria with a physical office and a resident Managing Director. The registration process necessitates the sponsorship of at least four (4) principal officers, including a dedicated Compliance Officer and a Chief Executive Officer. These individuals must undergo a Fit and Proper person assessment, which includes a review of their professional qualifications and verified post-graduation experience in the capital markets. Furthermore, directors and senior management must collectively own at least fifty percent (50%) equity in the firm on the date of issuance.

Further, the applicant must submit a comprehensive suite of operational documents, including a detailed Business Model and a Solicitor’s Opinion confirming that all applicable permits for the issuance and transfer of securities have been obtained. For providers seeking to operate as a Digital Asset Exchange, additional requirements apply, such as providing a technical description of the blockchain protocol, platform architecture, and a disaster recovery plan to ensure business continuity.

Also, every Virtual Asset Service Provider must demonstrate a robust internal control system that aligns with the Securities and Exchange Commission’s Anti-Money Laundering and Countering the Financing of Terrorism Regulations 2022. This involves the implementation of Know Your Customer (KYC) and Customer Due Diligence (CDD) procedures. Applicants are also required to provide evidence of registration with the Nigerian Financial Intelligence Unit (NFIU) and a sworn undertaking to render regular returns to the Securities and Exchange Commission.

Once the Securities and Exchange Commission is satisfied with the disclosures, it may grant a formal registration certificate. This document is the prerequisite for obtaining a Letter of No Objection from the Central Bank of Nigeria (CBN). Without this regulatory clearance, a provider cannot maintain a corporate bank account or facilitate fiat to crypto settlements, resulting in total exclusion from the formal Nigerian financial system.

The Consequences of Non-Compliance

The Nigerian government has adopted a zero-tolerance posture toward unregulated virtual asset activities. The Investments and Securities Act 2025 empowers the Commission to enforce strict adherence, and the costs of bypassing these mandates are substantial, they are:

1. Monetary Penalties and Administrative Sanctions

Failure to comply with registration requirements or reporting obligations triggers immediate enforcement action. In the first instance, a provider may face a penalty of not less than ₦5 Million (Five Million Naira), with additional daily fines of ₦200,000 (Two Hundred Thousand Naira) for every day the default continues. For more severe infractions, such as operating without any authorization, the Commission may impose discretionary fines of at least ₦20 Million (Twenty Million Naira) for corporate entities.

2. Operational Paralysis and Banking Exclusion

The most immediate impact of non-compliance is the loss of access to the formal banking sector. Under current Central Bank of Nigeria guidelines, financial institutions are prohibited from maintaining accounts for any provider that does not hold a valid license from the Commission. Without a letter of no objection or valid registration, a provider cannot process fiat to crypto settlements, effectively severing its link to the Nigerian economy.

3. Enforcement Actions and Criminal Prosecution

Non-compliant firms face the risk of immediate cease and desist orders which mandate the suspension of all platform activities. Furthermore, the Commission is empowered to initiate criminal prosecution against principal officers and directors of entities found to be operating in willful defiance of the 2022 Rules. Such actions often lead to the permanent disqualification of these individuals from serving as directors or sponsored individuals within the Nigerian capital market.

4. Reputational Damage and Systemic Exclusion

Unregistered providers are strictly excluded from the Accelerated Regulatory Incubation Program and the broader Virtual Asset Sandbox, environments designed for controlled innovation and regulatory testing. Beyond legal penalties, the public notification of an entity’s non-compliant status acts as a significant deterrent to institutional investors and international partners. In an increasingly transparent global market, being flagged for regulatory breaches often results in the total loss of market credibility and the inability to attract sustainable capital inflows.

Strategic Compliance Considerations for Market Participants

With the regulatory window for the Accelerated Regulatory Incubation Program narrowing, the Securities and Exchange Commission has signaled a transition toward aggressive enforcement. To mitigate the risks of market exclusion and operational suspension, stakeholders must move beyond basic awareness toward institutional readiness. The following roadmap outlines the critical actions required to align with the current oversight standards, they are:

1. Execute a Comprehensive Capital Audit: Conduct an immediate financial review to ensure the firm meets the revised thresholds for its specific license category and verify that the Fidelity Bond is active and legally sufficient to cover twenty-five percent of the mandated capital.

2. Validate Technical Infrastructure and Resilience: Commission an independent, third-party audit of the technology stack and cybersecurity architecture to ensure they satisfy the rigorous technical disclosure and business continuity standards established by the Commission.

 3. Formalize Governance and Equity Alignment: Confirm that the board of directors and senior management maintain the mandatory fifty percent collective equity stake and that all four required sponsored individuals are fully prepared for the Fit and Proper person assessment.

 4. Prioritize Regulatory Engagement for Asset Classification: Proactively engage the Securities and Exchange Commission to obtain formal classification of all digital tokens prior to any public offering to avoid the severe legal and financial liabilities associated with the unauthorized issuance of securities.

5. Operationalize Standardized Compliance Reporting: Deploy automated transaction monitoring and identity verification systems to ensure the entity can fulfill the mandatory weekly, monthly, and quarterly reporting obligations required immediately upon admission into the regulatory program.

Conclusion

The New Rules on Issuance, Offering Platforms and Custody of Digital Assets 2022 and ISA signify a definitive transition from reactive policy to proactive governance. While the rigorous registration protocols establish a significant threshold for entry, they are essential for the professionalization of the sector. For the compliant provider, Nigeria offers a substantial and tech savvy consumer base along with the opportunity to spearhead the digital finance revolution across Africa. Conversely, for those who neglect these mandates, the consequences of non-compliance will likely result in total exclusion from the formal financial ecosystem.

Noble Obasi is a Team Lead in the Finance Sector at Stren & Blan Partners, while Oreoluwa Nehizena is a Senior Associate and Ebube Okorji is an Associate in the same sector.

Stren & Blan Partners is a full-service commercial Law Firm that provides legal services to diverse local and international Clientele. The Business Counsel is a weekly column by Stren & Blan Partners that provides thought leadership insight on business and legal matters.

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