Introduction
The growth of financial technology has birthed innovative instruments such as stablecoins. These are digital assets designed to mirror the stability of fiat currencies while harnessing blockchain efficiencies. As adoption increases, regulators globally and locally are grappling with their legal classification and supervision. This flash note assesses whether stablecoins qualify as “securities” under Nigerian law, particularly under the Investment and Securities Act 2025 (“ISA“) and the applicable rules issued by the Securities and Exchange Commission (“SEC” or the “Commission“).
What are Stablecoins?
Although not expressly defined under current regulation, the Exposure on Amendments to the Rules on Digital Assets Issuance, Offering Platform, Exchange and Custody (the “Proposed VASP Rules“), effective from 30 June 2025, released by the SEC, defines a stablecoin as “a virtual asset that aims to maintain a stable value relative to a specified asset, or a pool or basket of assets, including one or more official currencies”.
Regulatory Framework for Stablecoins in Nigeria
- The SEC Rules on Issuance, Offering Platforms and Custody of Digital Assets 2022)
While the SEC Rules on Issuance, Offering Platforms and Custody of Digital Assets 2022 (the “Rules“) do not expressly address stablecoins, they regulate Virtual Asset Service Providers (“VASPs“), which include any person or platform involved in the exchange of virtual assets and fiat currencies, transfer of virtual assets, or safekeeping of virtual assets.
- Exposure on Amendments to the Rules on Digital Assets Issuance, Offering Platform, Exchange and Platform
The Proposed VASP Rules classify stablecoins as a form of virtual asset. Given that virtual assets are included in the definition of “securities” under the ISA 2025, stablecoins fall squarely within the regulatory jurisdiction of the SEC. The Proposed Rules introduce detailed compliance requirements, including mandatory registration of stablecoin issuers with the SEC, technical reserve standards, and Central Bank of Nigeria (“CBN”) oversight.
- The ISA 2025
The ISA 2025 expands the definition of securities to include “virtual and digital assets”, thereby placing virtual assets like stablecoins within the definition of “securities” under Nigerian law. Section 3(3)(i) of the ISA 2025 also empowers the SEC to regulate VASPs, digital asset operators, and exchanges that facilitate trading in such assets.
Conclusion
The explicit recognition of stablecoins as virtual assets and by extension, securities, under Nigeria’s regulatory framework has significant implications for market participants.
For issuers, the regime under the Proposed VASP Rules imposes a formal entry threshold.[1] Only financial institutions may issue stablecoins.[2] Also, they must first obtain a no-objection from the CBN and register with the SEC.[3] Issuers will also be required to maintain a trust account with a registered custodian bank, backed at all times by reserves equivalent to the value of tokens in circulation.[4]
While stablecoin issuers are not directly subject to investor protection fund requirements, the ISA 2025 mandates that “exchanges” establish and maintain an Investor Protection Fund. If DAXs are treated by the SEC as “exchanges” within the meaning of the Act, this obligation could apply to them. In that event, the fund would provide some safeguard to users by covering losses arising from insolvency, negligence, or misappropriation of funds by the exchange or its members, but not from asset performance or market volatility. However, the precise application of this obligation to digital exchanges remains subject to further regulatory clarification.
For end-users, the most immediate implication is enhanced regulatory clarity. The new framework creates identifiable obligations for issuers, DAX, and other market participants, and explicit pathways for redress, custody rules, and mandatory disclosures.
For further information or assistance, please contact aofintechteam@aluko-oyebode.com
Our Associate, Imadenobiejeh Adejumo contributed to this publication.
[1] Clause 29.1(b) of the Proposed VASP Rules
[2] Clause 29.1(b)(i) of the Proposed VASP Rules
[3] Clause 29.1(b)(ii) and (c) of the Proposed VASP Rules
[4] Clause 29.1(b)(iii) and (iv) of the Proposed VASP Rules
