Nigeria’s Securities and Exchange Commission (SEC) has raised the bar for crypto exchanges operating in the country by introducing a minimum capital requirement of ₦2 billion for Digital Asset Exchanges and custodians.
This is part of the Commission’s revised minimum capital requirement for regulated capital market entities.
The SEC has steadily tightened its grip on the crypto sector over time. It has rolled out licensing frameworks for virtual asset service providers (VASPs), formally classified certain crypto assets as securities, and licensed two crypto exchanges.
By forcing exchanges to maintain a sizeable financial buffer, the SEC is reducing the risk of platform failures, protecting users’ funds, and creating a more credible environment for institutional participation.
However, for an industry where many players are still relatively young and where a significant portion of crypto activity happens outside traditional/local exchanges, the policy raises difficult questions.
Will smaller local exchanges be able to survive the cost of compliance? Does a flat ₦2 billion threshold reflect the realities of Nigeria’s crypto market, or does it risk concentrating the industry in the hands of a few big players? And what does this mean for innovation in a country that has consistently ranked among the world’s most active crypto markets?
To answer these questions, this article examines how industry players and experts view the SEC’s new minimum capital requirement and what they believe it means for the crypto exchanges in Nigeria.
Good intent, poor execution
From a regulatory standpoint, the SEC’s decision to impose a ₦2 billion minimum capital requirement is not entirely out of place. According to Ayotunde Alabi, CEO of Luno Nigeria, the policy is “directionally defensible” when viewed through the lens of market integrity.
By forcing exchanges to hold more capital, the regulator reduces the risk of thinly capitalised operators collapsing under stress, particularly during periods of market volatility.
Victoria Fakiya – Senior Writer
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Stronger balance sheets also make it easier for exchanges to secure institutional partnerships, including relationships with banks and payment providers that are typically wary of counterparty risk.
However, Alabi argues that the rule is blunt in its current form, largely because it does not reflect how Nigeria’s crypto market actually works.
A significant share of crypto activity in the country still happens outside centralised exchanges, flowing through peer-to-peer trading, over-the-counter (OTC) desks, and informal stablecoin rails.
In that context, a high capital threshold risks over-regulating the compliant segment of the market while leaving the much larger informal perimeter relatively untouched.
The result, he suggests, is a mismatch between regulatory burden and actual risk. Exchanges that already operate within the rules face higher costs, while unregulated channels where consumer risk is often higher remain largely unaffected.
A more practical approach, Alabi says, would be proportional regulation.
“The more practical approach is usually proportionality: capital tiers linked to risk drivers such as custody exposure, volumes, and client asset liabilities, rather than a single high bar for most exchange models.”
This would allow regulators to target systemic risk more precisely without imposing the same burden on businesses with vastly different models.
For now, the question remains whether Nigeria’s crypto ecosystem is mature enough to absorb a ₦2 billion capital floor without stifling competition or whether the policy will accelerate structural changes before the market is ready.
Another industry insider shares Alabi’s sentiments, saying that while the minimum requirement is important for safety, it will only favour foreign exchanges, which have substantial control of Nigeria’s crypto market. A recent study found that more than 90% of Nigeria’s crypto market is dominated by Binance, Bybit, and WhatsApp P2P, while local exchanges struggle to get market share.
These exchanges, which already have deep pockets, can easily maintain their control, while the minimum capital requirement could further reduce the presence of local players in the crypto space.
Do some exchanges need to merge?
Beyond the ₦2 billion capital requirement, crypto exchanges in Nigeria are also grappling with rising regulatory costs. In 2024, the SEC proposed increasing the registration fee from ₦30 million to ₦150 million.
Alabi expects the pressure to lead to consolidation. “Some smaller local exchanges will either exit, merge, or pivot to narrower roles,” he says, noting that the combined burden of capital, compliance, and licensing costs may simply become “uneconomic” for many operators.
This risk is heightened by the SEC’s warning that sanctions will apply to exchanges that fail to meet the new requirements by the compliance deadline.
“When capital requirements and fixed regulatory costs rise together, exchanges typically respond by increasing spreads or trading fees, tightening risk limits, and reducing marginal customer acquisition and product experimentation,” Alabi explains.
While these adjustments may help platforms remain financially viable, they could also make crypto services more expensive and less accessible to everyday users.
There is, however, a potential upside to the shakeout. “The upside is that surviving operators may be materially stronger,” Alabi says, adding that this could “improve consumer confidence and reduce the incidence of undercapitalised ‘flash’ platforms.”
Still, the concern within the ecosystem is whether the cost of stability will be reduced competition and slower innovation. As regulatory barriers rise, Nigeria’s crypto exchange market may increasingly favour well-capitalised incumbents, leaving little room for smaller or emerging players to grow.
This affirms the concerns of an industry stakeholder who says proper regulation may have given industry players an upper hand over bigger foreign players.
She says stricter regulations may force foreign players to partner with local exchanges, creating some balance in the ecosystem.
The SEC consults more with crypto stakeholders
Alabi argues that regulations of this scale should be shaped through deeper and more structured engagement with industry stakeholders.
“Recapitalisation rules do more than set financial thresholds,” he explains. “They fundamentally alter market structure, competition, pricing, and consumer outcomes.”
The SEC has given exchanges a relatively long runway to comply, with a June 30, 2027, deadline, and has indicated that transitional arrangements may be considered on a case-by-case basis.
“Consultation should be more deliberate and continuous, particularly in a market as complex and fast-moving as crypto. Without that, there is a risk that well-intentioned rules produce unintended consequences.”
It reduces unintended consequences, such as pushing activity further into opaque channels.
“Publish an impact assessment, segment stakeholders—exchanges, custodians, brokers, fintech rails, banks, consumer groups—run structured consultations, and then implement with clearly defined transitional paths and supervisory expectations.”
Such an approach, he argues, would allow regulators to protect consumers and strengthen market integrity without unintentionally undermining innovation or driving crypto activity further underground.
