A post by Senator Ihenyen, Lead Partner at Infusion Lawyers and currently serves as the Executive Chair of the Steering Committee, Virtual Asset Service Providers Association (VASPA).
As the initial dust settles on the Securities and Exchange Commission (SEC) Nigeria’s Circular No. 26-1 – which outlines new minimum capital requirements for capital market operators (CMOs) – a troubling picture is beginning to take shape.
With virtual asset service providers (VASPs) now classified as CMOs, a comparison with global digital asset regulatory regimes shows that Nigeria’s new ₦2 billion (about $1.4 million) minimum capital requirement for Digital Asset Exchanges (DAXs) is not just steep, it ranks among the most restrictive globally. This raises concerns that the policy may end up constraining the very local capacity and resilience the government should be encouraging in order to keep Nigeria competitive in this fast-evolving sector.
REGULATION | SEC Nigeria Raises Minimum Capital Requirements, Sets Higher Bar for Crypto, Fintech, and Capital Market Operators
The Great Disconnect: Nigeria vs. the World
When viewed alongside established global hubs, Nigeria’s “capital muscle” strategy begins to look less like a safety buffer and more like a formidable barrier to entry.
Jurisdiction Licensing Category Minimum Capital Requirement (Approx. USD) European Union (MiCA 2026) Crypto-Asset Service Provider (CASP) $54,000–$163,000 (€50k–€150k) Hong Kong (SFC) Virtual Asset Trading Platform (VATP) $640,000 (HKD 5M paid-up) Mauritius / El Salvador VASP / DASP Varies (highly competitive / low) South Africa FSCA No specific minimum (based on financial soundness and liquidity) Nigeria (SEC 2026) Digital Asset Exchange (DAX) $1,400,000 (₦2 billion)
Under the European Union’s landmark Markets in Crypto-Assets (MiCA) framework, a company can obtain a license to operate across 27 countries for a fraction of what it costs to launch in Nigeria alone. While SEC Nigeria maintains that such capital levels are necessary to ensure “resilience,” many stakeholders – including myself – argue that Nigeria’s market, though high in adoption, remains nascent in terms of institutional depth.
Analytical Insight: The Capacity Conundrum
At the heart of industry pushback is a unified concern reflected in a public statement by the Blockchain Industry Coordinating Committee of Nigeria (BICCoN), the umbrella voice of Nigeria’s blockchain ecosystem.
The central message is clear: at this early stage of development, Nigeria lacks the local institutional capacity to compete globally if entry thresholds are set at a fully mature institutional level from the outset.
Three key concerns stand out:
Stifling Homegrown “Unicorns” By requiring $1.4 million in paid-up capital, the SEC appears to be demanding finished products rather than nurturing growth. Most of today’s global exchanges started small before scaling. In Nigeria, however, the “small” innovator risks becoming legally extinct.
The “Foreign Giant” Advantage Such a high bar effectively rolls out the red carpet for well-capitalized foreign firms, while local innovators, who may have the technical expertise but not billions in liquid capital, are pushed aside. This could result in a digital economy dominated entirely by external players.
Capital Intensity vs. Market Reality Unlike traditional financial institutions, crypto startups are fundamentally technology-driven. Their capital needs are tied to research, development, and security, not idle funds sitting in a paid-up account. Forcing $1.4 million to remain dormant is, for many startups, a “capital death sentence.”
Premature and Commercially Unjustifiable If Nigeria were a fully developed financial market like New York or London, such a requirement might be defensible. In an emerging ecosystem, however, it represents a mismatch. Indeed, the disparity could even deter “foreign giants,” pushing them to explore more commercially viable jurisdictions. Regulators must recognize this economic reality, as well-intentioned policies can still produce unintended consequences. Nigeria needs a more balanced path forward.
A Constructive Path Forward
To foster a genuinely competitive industry, the SEC should consider a comprehensive tiered licensing framework:
Tier 1 (Startup) Lower capital requirements for firms with limited transaction volumes.
Tier 2 (Growth) Graduated increases in capital as firms scale operations.
Tier 3 (Institutional) The full ₦2 billion requirement for exchanges handling large-scale public retail volumes.
This tiered approach could also be extended to other licensing categories. It would allow the market to develop organically while managing risk, rather than suffocating innovation under excessive capital demands however unintentional.
These views align with the positions of industry associations and professional bodies across Nigeria, all of which stress the importance of regulators genuinely listening to stakeholders. Cooperation, collaboration, and inclusive consultation in policymaking are essential not only for protecting markets but also for building trust and ensuring smooth compliance.
Without a ladder such as the one proposed, Nigeria risks winning the “stability” battle while losing the “innovation” war. By the time the June 2027 deadline arrives, we could be left with a “stable” market devoid of local players, or even sufficient foreign ones, to sustain it.
If regulation is truly meant to serve consumers and investors rather than bureaucracy and red tape, Nigeria must create a globally competitive environment that enables access to cutting-edge financial innovation.
REGULATION | IMF Flags Nigeria’s Crypto Surge as a Threat to FX Stability, Capital Controls – Urges for ‘Enforceable Legal Framework Urgently’
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This post is adapted from this original post.
