OPINION: SEC Framework & Future Of Digital Assets In Nigeria

Nigeria’s digital-asset market has reached a point where regulation is no longer a question of whether it should happen, but of how it should happen. The Securities and Exchange Commission’s proposed rules on Digital and Virtual Asset Operations, Custody and Markets, released on August 20, 2026, therefore deserve to be viewed not merely as another set of compliance requirements, but as an important attempt to bring a rapidly evolving market within a credible framework of investor protection, market integrity and responsible innovation.

The proposals are ambitious. They contemplate a N30m registration fee for digital asset exchanges, digital asset custodians, digital asset platform operators, digital asset offering platforms and real-world asset tokenisation platforms. They also propose minimum capital of N2bn for digital asset exchanges and custodians, N500m for digital asset platform operators (DAPO), digital asset offering platforms (DAOP) and real-world asset tokenisation platforms (RATOP), and N200m for virtual asset service providers (VASP). The framework further proposes fidelity insurance requirements and turnover-based supervisory fees.

These requirements will inevitably generate debate. Some will argue that the proposed capital thresholds are too high, that the retail investment limits could suppress participation, or that the cost of regulation could push innovative businesses offshore.

Those concerns deserve serious consideration. But the answer should not be to resist regulation itself. The more constructive question is how Nigeria can achieve the SEC’s legitimate objectives without creating unnecessary barriers to innovation and competition.

The starting point should be recognition that digital assets are no longer a peripheral phenomenon. They increasingly intersect with securities, investment products, payments, custody, fundraising, financial technology and, potentially, the tokenisation of real-world assets.

The regulatory challenge is therefore not simply to regulate crypto. It is to regulate activities that can create real financial consequences for Nigerians.
The SEC has already demonstrated that it does not intend to approach digital assets solely through prohibition. Its Accelerated Regulatory Incubation Programme (ARIP), provides a controlled environment in which digital-asset and other investment-service providers can test their business models under regulatory supervision. This is an important policy signal. It suggests that the Commission understands the fundamental dilemma confronting regulators everywhere: if regulation is too weak, investors bear unacceptable risks; if it is too rigid, legitimate innovation moves elsewhere.

The proposed framework should therefore be understood as part of a progression from experimentation to institutionalisation. ARIP can provide the testing ground, while full registration provides the framework for businesses that have demonstrated the capacity to operate safely at scale. The debate should therefore not be framed as regulation versus innovation. The real choice is between responsible innovation and uncontrolled innovation.

The proposed N2bn minimum capital for digital asset exchanges and custodians will probably attract the greatest attention. The relevant question, however, is not whether N2bn sounds large, but whether an institution entrusted with the assets and transactions of thousands or millions of investors should have meaningful financial capacity behind it.

To be sure, a digital asset exchange is not simply a software application. Depending on its business model, it may operate a trading venue, facilitate settlement, handle customer funds, provide custody and control access to valuable digital assets. A digital asset custodian may hold or control the cryptographic keys that provide access to customers’ assets. The failure of such an institution can consequently have consequences extending far beyond its shareholders.

Capital is therefore an important first line of defence. It gives an institution a financial cushion and demonstrates that those seeking to operate at the heart of the market have committed meaningful resources to the business.

But capital should not be confused with investor protection. An exchange could have N2bn of shareholders’ capital and still hold billions of naira worth of customers’ assets. If those customer assets are poorly segregated, inadequately reconciled or improperly deployed, the existence of N2bn capital does not solve the fundamental problem. The final rules should consequently place as much emphasis on segregation and protection of client assets, custody arrangements, reconciliation, liquidity, cybersecurity and recovery procedures as they do on paid-up capital.

This is consistent with international regulatory thinking. The European Union’s Markets in Crypto-Assets Regulation places significant emphasis on the segregation and custody of clients’ crypto-assets and funds, while the International Organization of Securities Commissions (IOSCO) identifies custody and client-asset protection as central elements of effective crypto-asset regulation.

The lesson for Nigeria is clear: capital protects the institution; segregation and custody rules protect the customer’s assets. Both are necessary.
There is, nevertheless, a legitimate concern that regulation can unintentionally become a barrier to entry. A technology company may have excellent systems, strong cybersecurity and experienced management but lack N2bn in capital. If the requirement is applied mechanically, such a company could be excluded from becoming a full digital asset exchange even where its actual operational risk is modest.

That could produce excessive market concentration, fewer competitors and potentially higher costs for consumers. Ironically, a regulation intended to reduce systemic risk could create a small number of dominant institutions whose failure would matter even more.

The answer is not necessarily to abandon the N2bn threshold. Rather, the SEC should consider developing a more risk-sensitive capital framework over time, taking account of factors such as customer assets under custody, transaction volumes, leverage, proprietary trading, liquidity exposure and operational risks.

The Commission should also preserve ARIP as a genuine pathway for responsible innovation rather than allowing the capital requirement to become an insurmountable barrier for emerging businesses.
The proposed retail-investment limits present another difficult policy question. The SEC proposes that a retail investor should generally not invest more than N1m per issuer and N10m in aggregate across digital-asset offerings within a 12-month period.

Where an investor seeks to exceed specified thresholds, the platform would have to provide prominent risk warnings, obtain express consent, confirm the investor’s understanding of the risks and assess the appropriateness of the investment, taking account of the investor’s knowledge, experience and financial circumstances.

The objective is understandable. Digital assets can be highly volatile, and retail investors can be particularly vulnerable to misleading promotions, herd behaviour and speculative enthusiasm. Yet an absolute monetary limit can sometimes be a blunt instrument. N1m represents very different levels of risk for different people. For one investor it may represent half of his or her savings; for another, it may be an insignificant fraction of investable wealth.

The SEC has therefore taken an important step by introducing suitability and appropriateness considerations alongside the monetary limits. Over time, the framework could go further by differentiating between investors and products according to risk. A sophisticated investor should not necessarily be treated in exactly the same manner as an inexperienced retail investor.

Likewise, a token representing a clearly identified and segregated pool of assets should not necessarily be treated identically to a highly speculative token with no identifiable underlying asset.
This brings me to perhaps the most promising aspect of the proposed framework: real-world asset tokenisation.

Tokenisation involves representing an asset, ownership interest, debt claim or other economic right digitally through a token recorded on a blockchain or similar technology. A real-world asset tokenisation platform could potentially facilitate the digital representation of interests in real estate, securities, commodities, infrastructure or other assets.

The potential significance for Nigeria is considerable. A large real-estate or infrastructure investment that ordinarily requires substantial capital from a small number of investors could, if properly structured, be divided into smaller economic interests and represented digitally. This could make certain investments more accessible and potentially more transferable.

But the technology does not itself create legal ownership. The fundamental question remains: what legal right does the token represent? Does the holder own an interest in the underlying property? Does the holder have a beneficial interest? Is it merely a contractual claim against the issuer? Is there a segregated pool of assets supporting it? What happens if the issuer becomes insolvent?

The SEC is therefore right to bring real-world asset tokenisation within the regulatory perimeter. The legal rights attached to a token must be as clear as the technology used to record it.
The proposed turnover-based supervisory fees also deserve careful consideration. A fully registered digital asset exchange would pay 0.025 per cent of adjusted turnover, while other fully registered entities would pay 0.015 per cent, with lower rates proposed for certain ARIP participants.

There is a sound principle behind this approach. Larger and more active institutions may require greater supervisory resources, making a turnover-related fee potentially fairer than imposing the same charge on a small operator and a very large exchange.

The critical issue, however, is the meaning of ‘adjusted turnover’. Turnover is not the same as revenue or profit. An exchange could process N1tn of customer transactions while earning only a small fraction of that amount in fees and commissions. If the supervisory charge were calculated on the entire gross value of transactions, the burden could become disproportionate. The final rules should therefore define adjusted turnover with precision and ensure that the fee remains cost-reflective, proportionate and competitively neutral.

Nigeria can learn valuable lessons from other jurisdictions. The European Union’s MiCA framework has created a comprehensive regulatory regime for crypto-assets covering authorisation, supervision, disclosure and crypto-asset services. The United Kingdom is also developing a comprehensive regulatory framework for crypto-assets, with the Financial Conduct Authority emphasising the objective of creating a market that is both trusted and competitive.

Nigeria should not simply copy these jurisdictions. Its economic circumstances, financial system and institutional capacity are different. The important lesson, however, is that regulatory certainty can itself become a competitive advantage. Serious investors are more likely to engage with a market when they know who regulates it, what the rules are, how customer assets are protected and what happens when an intermediary fails.

This is particularly important because digital businesses can operate across borders. The SEC will need effective cooperation with the Central Bank of Nigeria and other domestic regulators, as well as international counterparts. An operator should not be able to circumvent Nigerian investor-protection rules simply by locating its headquarters or servers outside Nigeria while actively targeting Nigerian investors.

The greatest test of the framework will ultimately be enforcement. No regulatory regime is stronger than its enforcement. Nigeria has seen the consequences of investment schemes operating outside regulatory supervision, and digital technology can make it easier for unregulated operators to reach investors across borders.

The final framework should therefore remain technologically neutral and risk-based. Blockchain is a technology; tokenisation is an application; digital assets are a broad category. What matters to the regulator is the economic activity and the risk it creates. A token representing a security should attract securities-style protection because of the rights and risks involved, not merely because blockchain technology is being used.

Overall, the SEC’s proposed framework deserves support. Its basic direction is correct. Businesses dealing with the public’s money and investment assets cannot be allowed to operate indefinitely without meaningful capital, governance, custody, disclosure and supervisory obligations.

But the success of the framework will depend on getting the balance right. The N2bn capital requirement is defensible, particularly for exchanges and custodians, but should eventually evolve towards a more risk-sensitive model. The retail-investment limits are understandable but should increasingly incorporate investor sophistication and product risk.

Turnover-based supervisory fees should be carefully calibrated so that they do not undermine competition. Above all, client-asset segregation, custody, reconciliation, liquidity and insolvency arrangements must receive at least as much attention as capital requirements.

The proposed fidelity bond should similarly be understood as an additional layer of protection against specified fraud risks, not as a substitute for sound custody arrangements. If an employee steals customers’ assets, insurance may provide some protection, but no fidelity bond can replace the fundamental requirement that customer assets be properly segregated and safeguarded in the first place.
Nigeria should also preserve the spirit of ARIP. A regulatory framework that allows innovative businesses to develop under supervision is preferable to one that forces every new idea immediately into a rigid regulatory mould. This can allow the SEC to learn from the market while allowing responsible innovators to grow.

All said, the real test of the SEC framework will therefore not be how many operators it excludes or how many it registers. It will be whether an investor can put money into a Nigerian-regulated digital asset with reasonable confidence that the asset is properly described, the intermediary is adequately capitalised, customer property is segregated, conflicts are controlled, fraud is deterred and there is a clear legal remedy when something goes wrong.

If the SEC can achieve that while keeping the door open to responsible innovation, these proposed rules will do more than regulate Nigeria’s digital-asset market. They could provide the foundation for the next generation of Nigeria’s capital market.

-Prof Uche Uwaleke is the Director of the Nasarawa State University Institute of Capital Market Studies and President of the Capital Market Academics of Nigeria