Nigeria’s Securities and Exchange Commission (SEC) has proposed a minimum capital requirement of ₦2 billion each for Digital Asset Exchanges (DAXs) and Digital Asset Custodians (DACs) as part of a broader regulatory framework for the country’s digital and virtual asset market.

The proposed requirement is contained in the SEC’s Rules on Digital and Virtual Assets Operations, Custody and Markets, which establish capital, registration, conduct, custody and supervisory requirements for businesses operating in Nigeria’s digital-asset ecosystem.

Under the proposed framework, the ₦2 billion minimum capital threshold would apply to two of the most significant categories of digital-asset businesses: exchanges that facilitate secondary trading and custodians responsible for safeguarding digital assets and private keys on behalf of clients.

The SEC has proposed lower capital thresholds for other categories of digital-asset businesses. Digital Asset Platform Operators (DAPOs), Digital Asset Offering Platforms (DAOPs) and Real-World Asset Tokenisation Platforms (RATOPs) would each require a minimum capital of ₦500 million, while Virtual Asset Service Providers (VASPs) would face a ₦200 million minimum capital requirement.

The proposed capital structure signals a differentiated regulatory approach based on the nature and potential risk of each digital-asset activity.

Under the proposed rules, a Digital Asset Exchange is defined as a platform facilitating the secondary trading of digital or virtual assets through order books, matching engines, automated mechanisms or similar systems. A Digital Asset Custodian, meanwhile, is responsible for holding, safeguarding, administering or controlling digital assets or private keys on behalf of another person.

₦2bn threshold for exchanges and custodians

Under the proposed rules, a Digital Asset Exchange is defined as a platform facilitating the secondary trading of digital or virtual assets through order books, matching engines, automated mechanisms or similar systems. A Digital Asset Custodian, meanwhile, is responsible for holding, safeguarding, administering or controlling digital assets or private keys on behalf of another person.

The higher capital requirement for these two categories comes alongside extensive operational and risk-management obligations.

For exchanges, the rules require client assets to be segregated from the exchange’s own assets and those of parent companies, affiliates and service providers. Exchanges are also prohibited from using client assets for their own benefit or for purposes outside authorised client deposit, trading, settlement or withdrawal instructions.

The proposed framework also restricts the custody activities that a DAX can perform directly. Where custody extends beyond incidental hot-wallet operations, the exchange may be required to use a separately registered Digital Asset Custodian or obtain full custodian registration.

For custodians, the rules require the legal segregation of client assets from proprietary assets and assets belonging to affiliated entities. Custodians must also maintain separate wallets or equivalent internal ledgering systems to ensure accurate attribution of client holdings.

80% of client assets to be held in cold storage

The SEC’s proposed rules also introduce a significant custody safeguard, requiring Digital Asset Custodians to maintain at least 80% of client digital or virtual assets in cold storage, unless the Commission prescribes another percentage.

Assets held in hot or warm wallets would be limited to amounts reasonably required for withdrawals, settlement, transaction processing or other operational purposes, with additional controls around wallet limits, monitoring, reconciliation and access.

Custodians would also be subject to strict cryptographic key-management requirements, including multi-party controls, segregation of duties, restricted access and recovery arrangements.

The framework further requires multi-signature or equivalent controls for material transactions and seeks to prevent a single person or single point of failure from being able to initiate or authorise significant transactions.

Registration fees also rise

Beyond the capital requirement, the proposed rules establish significant registration and supervisory fees.

DAXs, DACs, DAPOs, DAOPs and RATOPs would each pay a ₦30 million registration fee, alongside a ₦100,000 processing fee and ₦300,000 application fee.

VASPs would pay a ₦15 million registration fee, in addition to the same ₦100,000 processing and ₦300,000 application fees.

The rules would also impose recurring supervisory charges linked to adjusted turnover.

A DAX operating under the SEC’s Accelerated Regulatory Incubation Programme (ARIP) would pay 0.015% of adjusted turnover, while other entities under ARIP would pay 0.0075%.

Following full registration, DAXs would pay a supervisory fee of 0.025% of adjusted turnover, while other regulated entities would pay 0.015%.

The SEC says it may review these supervisory fees after 12 months of implementation and periodically thereafter, taking into account market development, transaction volumes, supervisory costs, investor protection, market integrity, financial stability and the competitiveness of Nigeria’s digital-asset ecosystem.

SEC proposes phased route to full registration

The proposed framework would not require every prospective operator to immediately obtain full registration.

The rules establish an Accelerated Regulatory Incubation Programme (ARIP) as a transitional framework through which eligible digital-asset businesses can operate under approval-in-principle, restricted-scope or enhanced-supervision arrangements pending full registration.

Except where otherwise approved, entities seeking registration would initially apply through ARIP. Successful applicants could receive approval-in-principle valid for two years, although such approval would not constitute full registration as a capital-market operator.

The SEC would subsequently assess whether an applicant has demonstrated the operational, financial, governance, technological and compliance capacity required for its proposed business before granting formal registration.

The rules also provide circumstances under which certain businesses may bypass ARIP, including existing capital-market operators adding digital-asset functions, fully registered digital-asset providers from IOSCO-member jurisdictions and qualifying subsidiaries of duly licensed financial institutions.

Rules extend beyond crypto exchanges

The proposed SEC framework covers a much broader range of digital-asset activities than cryptocurrency trading alone.

It applies to the issuance and offering of digital and virtual assets, tokenisation, trading, custody, transfer and settlement, as well as investment, advisory and financial services related to digital and virtual assets. Its scope covers entities operating in Nigeria, providing services to Nigerian residents or targeting Nigerian investors or the Nigerian market through digital channels.

The rules recognise several categories of regulated businesses, including DAXs, DACs, DAPOs, DAOPs, RATOPs and VASPs.

VASPs would be permitted to provide specific authorised services such as order execution and routing, transfer and settlement, on-ramp and off-ramp services, non-custodial wallet interfaces, staking and validator-related services, digital-asset lending and borrowing, yield-generating arrangements, portfolio management, investment advisory, placement and distribution services.

However, a VASP would only be permitted to provide services covered by its specific registration, approval or authorisation. It would also have to safeguard client assets and information, use registered custodians where applicable, maintain appropriate risk and cybersecurity controls and comply with AML/CFT/CPF, sanctions-screening and other financial-crime prevention requirements.

Stronger oversight of digital-asset transactions

The proposed rules would give the SEC expanded visibility into digital-asset operations.

Regulated entities could be required to provide the Commission with API-based or other electronic access to operational, transactional, financial, risk, wallet, custody, settlement and compliance data on a risk-based basis.

Businesses would also have to maintain systems capable of identifying and monitoring transactions involving Nigerian residents and cross-border digital-asset flows.

The proposed framework requires designated transaction wallets, accounts or equivalent mechanisms to distinguish domestic and cross-border flows and ensure that transactions into and out of Nigeria are traceable, auditable and attributable to identifiable users or counterparties.

Additional risk-based controls would apply to transfers involving self-hosted or unhosted wallets, high-risk jurisdictions, privacy-enhancing technologies, anonymity-enhanced assets and mixing or tumbling services.

24-hour incident reporting

The proposed framework would also tighten reporting obligations for digital-asset operators.

A regulated entity would be required to notify the SEC within 24 hours of a material change, material cyber incident, system failure, operational disruption, loss of client assets, data breach or other material event.

For material cyber incidents and certain other operational incidents, the rules require an initial notification within 24 hours and a detailed incident report within 48 hours, unless otherwise directed by the Commission.

The rules further require regulated entities to maintain complete and retrievable records, including client, transaction, wallet, custody, settlement, order, complaint, financial and compliance records, for at least seven years.

What proposal means for Nigeria’s digital-asset market

The proposed ₦2 billion minimum capital requirement for DAXs and DACs represents one of the most significant financial thresholds in the SEC’s proposed digital-asset regulatory architecture.

The differentiated capital structure places the highest financial requirement on businesses operating exchanges and custody infrastructure, while imposing progressively lower thresholds on platform operators, offering platforms, tokenisation platforms and VASPs.

The framework also combines capital requirements with custody safeguards, technology and cybersecurity controls, financial-crime compliance, transaction monitoring, regulatory access and ongoing supervisory fees.

Taken together, the proposed rules would move Nigeria’s digital-asset market towards a more formalised capital-market framework in which operators must demonstrate not only sufficient capital, but also the governance, technology, risk-management and client-asset protection capacity required to operate under SEC supervision.