Nigeria, a nation ranking second globally in cryptocurrency adoption, faces a pivotal moment as its new Investment and Securities Act (ISA) 2025 misclassifies Bitcoin as a security. This decision comes at a time of unprecedented cryptocurrency movements. Between July 2023 and June 2024, the nation experienced a staggering $125 billion in on-chain value passing through. That misclassification is truly alarming. It would severely limit innovation in the country and further exclude millions of Nigerians from leveraging Bitcoin as a key financial resource.
The sudden change in this regulatory regime comes at a time of unprecedented economic collapse and insecurity within Nigeria. The country is facing 21% inflation and central bank – driven credit walls, pushing millions of citizens to search for alternative financial means to survive. Bitcoin moonshot to ₦121 million, setting a new record price on some peer-to-peer (P2P) platforms in 2024. It has emerged as an important outlet for ordinary Nigerians seeking to survive the sliding value of the naira.
For most Nigerians, Bitcoin is a lifeline allowing them to protect their wealth and move money across borders easily. Entrepreneurs such as Bernard Parah, CEO of Bitnob, are using Bitcoin right now to make international payments free. Especially as they do so in countries where formal banking systems too often impose costs and hurdles that stifle economic activity.
The Investment and Securities Act (ISA) 2025, though, looms ominously over these new, exciting applications for Bitcoin. Worse, by calling Bitcoin a security the Act brings it under tight regulations made for traditional securities. This approach fails to recognize the key distinctions that set Bitcoin apart from stocks, bonds, and other securities.
The misclassification carries several potential implications. It would severely dampen the progress of Nigeria’s rapidly developing crypto sector, deterring potential investments and innovation. This can lead to unintended barriers of entry for innovators and entrepreneurs such as Bernard Parah. His companies are deeply rooted in the exclusive characteristics of Bitcoin.
The Act’s approach is a dramatic departure from the practice in other nations. Those countries have taken a broader, less binary approach to cryptocurrency regulation. Switzerland and Singapore have taken the lead in creating regulatory frameworks that clarify the categories of different digital assets. Importantly, they learn that Bitcoin and other cryptocurrencies are not easily categorized in the traditional financial world.
While the passage of the ISA 2025 could lead to Nigeria's removal from the Financial Action Task Force (FATF) Gray List, a move that would improve the nation's international financial standing, the cost may be too high. Unfortunately, the promise of exiting the Gray List could soon be overshadowed by the harm done to Nigeria’s burgeoning cryptocurrency market.
Until recently, Nigeria had a real chance to become the go-to destination for crypto investment and innovation on the African continent. The current regulatory approach risks wasting this opportunity and at worst forcing that talent and capital to jurisdictions more welcoming towards crypto.
In addition, Nigeria’s financial sector is highly susceptible to cyberattacks, which would result in an economic loss of ₦53.4 billion by 2024. Excessive regulation of cryptocurrency would push cryptocurrency transactions further underground. This not only makes tracking them much less effective, but increases the potential for nefarious activity. A more balanced approach, one that recognizes the unique characteristics of Bitcoin and other cryptocurrencies, would be more effective in mitigating these risks.
To classify Bitcoin as a security would indicate a lack of understanding of the technology that fuels it. This arbitrary classification ignores the huge range of capabilities Bitcoin can provide. Bitcoin functions as a non-government, peer-to-peer cryptocurrency, whereas securities are stocks, bonds, or equity that indicates ownership in an entity. Regulating Bitcoin under the existing securities regulatory framework results in a regulatory round peg in a square hole and that’s bad.
