Nigeria's SEC to Regulate Virtual Asset Service Providers Under New Law

The Securities and Exchange Commission (SEC) of Nigeria is implementing new regulations to oversee Virtual Asset Service Providers (VASPs) under a revised legal framework.

This move is part of a broader effort to regulate digital assets and protect investors in the Nigerian market.

The new law treats digital assets, including cryptocurrencies, as securities unless proven otherwise. This places them under the regulatory purview of the SEC, requiring issuers to demonstrate that their assets do not qualify as securities.

The regulations now cover foreign issuers and operators targeting Nigerian investors, potentially limiting the use of reverse solicitation by offshore VASPs.

The SEC has defined terms like "airdrop," "stablecoin," and "Finfluencer," indicating a deeper understanding of digital asset operations and potential regulatory requirements.

VASPs must register under categories such as Digital Asset Offering Platforms (DAOPs), Digital (Virtual) Assets Exchanges (DAXs), Digital Asset Custodians (DACs), and the newly introduced Digital Asset Intermediaries (DAIs).

Advertisements for digital assets require SEC approval, and influencers must disclose any compensation for promoting these assets. There are penalties for non-compliance, including fines and imprisonment.

Registered VASPs must have a minimum of five board members, with 60% being of Nigerian origin. The CEO's term is limited to five years initially, with an option for reappointment.

The new law explicitly prohibits Ponzi schemes and imposes severe penalties for their promoters.

The new regulations aim to enhance investor protection and bring clarity to the digital asset market in Nigeria.

Offshore providers may need to adjust their strategies to comply with the new rules, potentially requiring local entities or regulatory approvals.

The requirement for influencers to disclose compensation and the prohibition on certain advertising practices are designed to increase transparency and reduce misleading promotions.

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