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NIGERIA’S PROPOSED RULES ON DIGITAL AND VIRTUAL ASSETS: KEY PROVISIONS AND IMPLICATION FOR BUSINESSES

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BY SEUN TIMI-KOLEOLU & HILLARY OKOROTIE

Introduction 

On August 20, 2026, the Securities and Exchange Commission (“SEC”) published the Proposed Rules on Digital and Virtual Assets Operations, Custody and Markets (the “Proposed Rules”). The Proposed Rules seek to establish a comprehensive regulatory framework for digital and virtual asset activities in Nigeria, including the issuance, offering, trading, custody, transfer and settlement of digital and virtual assets. 

The Proposed Rules set out: the categories of activities to which they apply; the prescribed requirements for conducting business in relation to digital and virtual assets; and regulatory requirements relating to the issuance and trading of digital assets. 

In this newsletter, we provide an overview of the key provisions of the Proposed Rules and their potential implication for businesses operating within Nigeria’s digital and virtual asset ecosystem. 

Key Provisions and Implication of the Proposed Rules 

Where the proposed rules are implemented the following are key provisions that players in the digital and  virtual assets space should take note of when operating in the Nigerian market. 

1. Application of the Proposed Rules 

The Proposed Rules will apply to persons and businesses operating in Nigeria, as well as persons providing services to Nigerian residents or the Nigerian market through digital channels in relation with the issuance, trading, custody and management of digital and virtual assets. 

The Proposed Rules will also apply to persons and entities facilitating any aspect of digital and virtual asset services, including Virtual Asset Service Providers (“VASPs”) and Digital Asset Custodians(“DAO”). 

2. Obligations of Regulated Entities 

Regulated entities are required to comply with various obligations in the conduct of their business and in the issuance, offering, and trading of digital assets in Nigeria. These obligations include, amongst others, the following: 

  1. Advertisement and Promotion: In connection with the issuance and offering of digital assets in Nigeria, entities must ensure that no publication, advertisement, or promotional material is made in respect of a digital asset unless the asset has been duly registered with SEC. Where an entity advertises or promotes a registered digital asset, such advertisement or promotional content must be accurate, fair, and not misleading.
  2. Changes to the Structure of the Entity: Where there are material changes to the structure or operations of a regulated entity, including changes to its ownership, governance structure, technology architecture, or business model, the entity must obtain SEC’s prior approval before implementing such changes. In addition, any cybersecurity incident, data loss, or loss of assets must be reported to SEC within twenty-four hours of such occurrence.
  3. Dispute and Conflict of Interest Management: Entities engaged in the trading of digital assets must maintain a comprehensive framework for receiving, handling, and resolving customer complaints. They are also required to establish and maintain appropriate procedures for identifying, managing, and mitigating conflicts of interest arising in connection with their digital asset trading activities.
  4. System Access and Transaction Monitoring: SEC may require regulated entities to provide API-based access to their financial, operational, and transaction data for regulatory monitoring and supervisory purposes. The Proposed Rules further require entities to implement systems capable of monitoring and reporting transactions involving Nigerian residents. In respect of cross-border transactions, entities must implement systems that maintain designated transaction wallets for domestic and cross-border asset flows. Such systems must also ensure that all inflows into and outflows from Nigeria are traceable to identifiable users.

3. Disclosure Requirements for the Issuance of Digital Assets 

The Proposed Rules require the disclosure of all material information relating to a digital asset prior to its issuance. An issuing entity is required to prepare a white paper containing the issuers information, characteristics, offer structure of the digital asset, and other material information to enable prospective investors make informed investment decisions. The whitepaper must be filed with SEC, and the issuing entity must obtain a no-objection or approval from SEC before offering the digital asset to the public. 

The issuing entity and its officers will be responsible for any misrepresentation or omission of material information contained in the whitepaper. Where there is a material change to the information relating to the digital asset following SEC’s no-objection or approval, the issuing entity will be required to file a supplementary or amended whitepaper with SEC and suspend further issuance of the digital asset pending compliance with the applicable requirements. 

4. Issuance of the Digital Assets 

The Proposed Rules provide that, for an asset to be eligible for issuance, the rights and obligations attached to the asset must be clear, the structure of the asset must be transparent, and the risks must be adequately disclosed. 

Digital assets shall be categorized either as Asset-Referenced Tokens, Asset-Backed Tokens, or other digital assets, including cryptocurrencies and utility tokens. Assets that are anonymous, exhibit a fraudulent token structure, or constitute an unbacked stablecoin will be prohibited from issuance. The asset must also be offered through a Digital Asset Offering Platform approved by SEC. 

5. Registration Under the Proposed Rules 

An entity intending to register under the Proposed Rules must apply to first participate in SEC’s Accelerated Regulatory Incubation Programme (“ARIP”). Following an application under the ARIP, SEC may grant the applicant an Approval-in-Principle to commence operations subject to the conditions prescribed by SEC. The Approval-in-Principle will be valid for a period of two years, after which SEC may require the entity to apply for full registration. 

SEC may, in certain circumstances, permit an applicant to bypass the ARIP process. This may apply where the applicant is a registered capital market operator, a registered (“VASP”), or a subsidiary of a licensed financial institution. 

To qualify for registration under the Proposed Rules, an entity must, amongst  other requirements, be incorporated in Nigeria in accordance with the Companies and Allied Matters Act, 2020. Its Chief Executive Officer and other principal officers must be resident in Nigeria, and the entity must maintain a registered office address in Nigeria. The applicant must also satisfy other registration and regulatory requirements prescribed by SEC. 

Conclusion 

SEC’s objective under the Proposed Rules is to establish a comprehensive regulatory framework for the digital assets market in Nigeria. Notably, the framework extends beyond the regulation of intermediaries engaged in the trading of digital assets to also encompass digital asset issuers and other relevant participants in the digital asset’s ecosystem. 

If implemented, the Proposed Rules will have significant implications for foreign entities seeking to issue digital assets in the Nigerian market. Such entities may be required to comply with requirements relating to the incorporation of a domestic entity where the parent company is incorporated outside Nigeria, as well as requirements concerning the residency of principal officers in Nigeria.

TAXATION OF VIRTUAL ASSETS IN NIGERIA

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SEUN TIMI-KOLEOLU & PROMISE ITAH

Introduction

On July 31, 2026, the Nigeria Revenue Service (NRS) issued the Guidelines on the Taxation of Virtual Assets (the “Guidelines”), providing the first comprehensive administrative framework for the taxation of virtual asset transactions in Nigeria.

While the Guidelines do not introduce new taxes, they clarify how existing tax laws apply to virtual assets and establish new compliance obligations for taxpayers, Virtual Asset Service Providers (VASPs) and certain peer-to-peer (P2P) marketplace operators.

This newsletter highlights the key provisions of the Guidelines and their implications for businesses operating within Nigeria’s digital asset ecosystem.

  1. Who and What Are Covered by the Guidelines?

The Guidelines apply to persons and entities who acquire, dispose of, exchange or otherwise deal in virtual assets; receive income or payments in virtual assets; operate as VASPs or P2P marketplace operators; derive taxable income, profits or gains from virtual assets; or provide virtual asset-related services. They cover a broad range of activities, including cryptocurrencies, stablecoins, non-fungible tokens (NFTs), tokenised assets, DeFi transactions, staking, mining, airdrops and token swaps.

  1. What transactions are taxable?

A tax liability generally arises where a virtual asset is disposed of or income is earned from a virtual asset activity. Common taxable transactions include:

  • selling a virtual asset;
  • exchanging one virtual asset for another;
  • receiving staking or mining rewards;
  • earning rewards from DeFi activities;
  • selling NFTs;
  • receiving virtual assets as payment for goods or services; and
  • other transactions that result in taxable income or gains.

Depending on the nature of the transaction, the applicable taxes may include income tax, withholding tax, value added tax (VAT) and stamp duty.

  1. What transactions are not taxable?

The Guidelines clarify that not every transaction involving a virtual asset gives rise to a tax liability. Generally, the following are not treated as taxable events:

  • holding a virtual asset without disposing of it;
  • transferring virtual assets between wallets owned by the same person;
  • locking up virtual assets for staking;
  • creating or minting NFTs;
  • tokenising real-world asset without a change in beneficial ownership; and
  • using virtual assets as collateral for a loan.

The Guidelines also clarify that the transfer of a virtual asset is generally not subject to VAT. Instead, VAT applies to taxable services provided by VASPs, such as exchange, brokerage and transaction facilitation services. In addition, the Guidelines do not apply to the eNaira or other Central Bank Digital Currencies (CBDCs).

  1. How Are Taxable Gains Computed?

The Guidelines introduce a new method for calculating gains from the disposal of virtual assets. Under this method, the purchase price and sale price are first converted into United States Dollars (USD) using the applicable exchange rates on the dates the asset was acquired and sold. The gain is then calculated in USD before being converted back into naira for tax purposes.

This approach is designed to ensure that taxpayers are taxed on their actual investment gains rather than gains arising solely from changes in the exchange rate.

  1. How Will Virtual Asset Taxes Be Collected?

The Guidelines establish a structured framework for collecting taxes on virtual asset transactions, with responsibility shared between taxpayers and intermediaries such as VASPs and P2P marketplace operators. While taxpayers remain responsible for filing their annual tax returns and paying any outstanding tax, these intermediaries are required to deduct and remit certain taxes on behalf of users where applicable. The Guidelines also clarify that income earned from virtual asset activities, such as staking rewards, mining rewards, DeFi yields and virtual assets received as payment for goods or services, is generally taxable when received.

  1. What Does Token-Native Tax Remittance Mean?

The Guidelines introduce a token-native tax remittance framework. Under this framework, withholding tax on qualifying virtual asset disposals and stamp duty are deducted and remitted in the same virtual asset used in the transaction, rather than first being converted into naira.

To support this framework, the NRS intends to establish a Token Treasury, which will initially accept only supported virtual assets from participating registered VASPs. Where a transaction involves an unsupported virtual asset, the Guidelines provide that it will be converted into a supported token without affecting the taxpayer’s withholding tax credit.

  1. How Should Virtual Assets Be Valued?

The Guidelines establish valuation rules to ensure that virtual assets are valued consistently for tax purposes. Where a virtual asset is not directly priced in USD, taxpayers must use approved valuation sources to determine its fair market value and retain records to support their tax calculations. The Guidelines also prescribe how the cost of a virtual asset should be determined depending on how it was acquired, whether through a purchase, token swap, staking or mining rewards, a hard fork (where a blockchain splits and creates new tokens), or an airdrop (where free tokens are distributed by a project).

Where a taxpayer holds multiple units of the same virtual asset acquired at different times or prices, the Guidelines require a consistent method for determining the cost of the units disposed of. The default method is First-In, First-Out (FIFO), which assumes that the earliest acquired units are sold first, or the Weighted Average Cost method, which uses the average cost of all units held to calculate gains or losses. Once a method is adopted, it must be applied consistently.

Taxpayers may offset virtual asset gains and losses within the same tax year, but losses can only be applied against virtual asset gains and cannot be used to reduce other income.

  1. What Are the Key Compliance Requirements and Penalties?

The Guidelines impose extensive compliance obligations on taxpayers, VASPs and certain P2P marketplace operators. Among other things, taxpayers engaging in virtual asset activities must register for tax purposes and obtain a Tax Identification Number (TIN), while VASPs are required to verify users’ TINs, maintain prescribed records, file statutory returns and comply with the reporting requirements under the Nigeria Tax Administration Act (NTAA).

Failure to comply with these obligations may result in significant penalties including administrative penalties imposed by the NRS.

Key Takeaways for Businesses

The Guidelines provide greater certainty on the taxation of virtual assets but also introduce significant compliance obligations. Businesses should therefore:

  • review how their virtual asset transactions are treated under the Guidelines;
  • ensure their accounting and tax systems can support the new valuation and reporting requirements;
  • maintain comprehensive transaction, valuation and exchange-rate records;
  • review arrangements with VASPs and other intermediaries to understand how tax compliance obligations will be managed; and
  • monitor further guidance from the NRS as the new framework is implemented.

Conclusion

The Guidelines mark a significant step in the development of Nigeria’s virtual asset tax framework by providing much-needed clarity on the taxation of digital asset transactions and the compliance obligations of taxpayers and intermediaries. While this newsletter highlights some of the key provisions of the Guidelines, it is not intended to be an exhaustive analysis of the framework.

Businesses involved in virtual asset activities should review their systems, governance and compliance processes to ensure they are prepared to meet the new reporting, withholding and record-keeping requirements and seek appropriate advice where necessary.