Nigeria’s New Investment Law to Recognize Cryptocurrencies and Enhance Regulations

Nigeria is set to recognize cryptocurrencies through the 2025 Nigerian Investment and Securities Bill, awaiting President Bola Tinubu’s signature. The new law redefines crypto assets, supports trading platforms, and aims to enhance investor safety against fraud. Regulatory changes are driven by fintech innovations, with a goal to modernize the capital market and facilitate economic diversification.

Nigeria is poised to officially recognize cryptocurrencies through the newly passed 2025 Nigerian Investment and Securities Bill, which awaits the signature of President Bola Tinubu. This legislation replaces the outdated 2007 law and provides a definition for crypto assets as digital representations of value intended for trading and investment purposes. Notably, it excludes digital fiat currencies from this classification while granting legal recognition to trading platforms and exchanges for secure management of digital assets.

Initially, the Nigerian government reacted to the rise of cryptocurrencies with concern following the drop in crude oil prices and the naira’s devaluation. As citizens sought refuge in cryptocurrencies during economic turbulence, Nigeria surged in cryptocurrency holdings, becoming the second largest globally after the United States. In response, the Central Bank of Nigeria directed that banks close accounts involved in cryptocurrency trading, leading to a significant underground trading movement that utilized peer-to-peer transactions, with Binance emerging as a principal player.

Following his election, President Tinubu adopted a more lenient approach to cryptocurrencies; however, a crackdown on Binance ensued shortly thereafter, resulting in the detention of its executives amid allegations of illegal activities. The Central Bank’s struggles with cryptocurrency regulation coincided with efforts from the Nigerian Securities and Exchange Commission (SEC) to establish effective oversight, culminating in the significant legislative overhaul reflected in the new Investment and Securities Act.

Osita Izunaso, chairman of the Senate Committee on Capital Markets, expressed optimism regarding the newly proposed legislation. He stated it would enhance the capital market’s growth and diversification, creating a favorable investment environment. Regulatory adaptations have emerged, propelled by fintech innovations that provide retail investors with alternative investment opportunities and potentially higher returns than traditional banks.

The reforms included provisions for a commodities trading market and a regulatory framework for futures in currencies and other assets. New regulations will require federal and local authorities to adhere to stricter borrowing guidelines to ensure fiscal accountability. Meanwhile, aggressive measures against investment fraud have intensified, with the SEC proactively warning the public about fraudulent schemes and operators.

Under the new legislation, penalties for investment fraud, including Ponzi schemes, will involve up to 10 years of imprisonment. The Investor Protection Fund has been expanded to cover losses due to business cessation of brokerage firms, a crucial shift from prior stipulations. The legislative reforms chiefly aim to enhance investor safety, granting the SEC authority over corporate mergers and acquisitions and ensuring oversight of companies listed on exchanges.

Despite concerns from the Central Bank regarding the SEC’s expanded jurisdiction, the investment landscape in Nigeria is evolving. With three major exchanges operating, including the Nigerian Exchange and FMDQ trading platforms, there is a pressing need for a world-class capital market to support Nigeria’s economic diversification. Emomotimi Agama, SEC Director General, highlighted that the enactment of the Investment and Securities Bill marks a crucial step toward achieving this goal.

In conclusion, Nigeria’s new Investment and Securities Bill represents a significant shift in the country’s approach to cryptocurrency, recognizing its potential within a regulated framework. This legislation not only provides clearer definitions and protections for investors but also seeks to modernize the capital markets. The ongoing adaptations highlight both the challenges and opportunities facing Nigeria as it navigates the evolving landscape of digital assets and investment.

Original Source: african.business