Technology

Nigeria is only other country in the world that treats Bitcoin as a security. Why?

Sixteen years after it launched as a libertarian experiment to sidestep government control, Bitcoin still defies easy classification. Is it money, a speculative asset, or simply digital gold? For regulators, particularly in emerging markets like Nigeria, that question is far from academic. In Sep...

TechCabal

published: Jul 18, 2025

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Sixteen years after it launched as a libertarian experiment to sidestep government control, Bitcoin still defies easy classification. Is it money, a speculative asset, or simply digital gold? For regulators, particularly in emerging markets like Nigeria, that question is far from academic.

In September 2020, Nigeria’s Securities and Exchange Commission (SEC) classified Bitcoin and other cryptocurrencies as securities, a decision cemented in the country’s 2025 Investment and Securities Act.

The move places Bitcoin under capital markets oversight, mirroring policy recommendations from the International Organisation of Securities Commissions (IOSCO), which says crypto-asset products should follow the same investor-protection rules as traditional financial instruments when their economic functions are similar.

However, the nature and utility of Bitcoin make it a hard asset to classify. Let’s argue the cases.

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The case for securities

A security is a representation of money. Like bearer bonds or stocks, it gives the holder financial rights and typically involves the expectation of profit, often based on the work of others. When Company A issues securities, investors who buy into what it’s selling can profit from their investment if the company performs well.

If Bitcoin is regulated as a security, it would bring closer oversight to the crypto industry. Exchanges, token issuers, and intermediaries must submit audited reports, follow strict disclosure rules, and comply with anti-fraud regulations. These rules, drawn from traditional capital markets, protect investors and ensure fair play.

This is a dicey situation. First, according to the Howey Test, a transaction qualifies as a security if it involves an investment of money in a common enterprise with the expectation of profit, primarily from the efforts of others. It’s a legal test used in the United States to determine what falls under securities law.

Bitcoin arguably fails the test. There’s no identifiable promoter, no central enterprise managing it, and no coordinated effort driving its value. People may invest in Bitcoin hoping for profit, but the price is moved by market dynamics, not the actions of a single issuer or team. 

That’s why regulators in many countries, including the US Commodity Futures Trading Commission (CFTC), have leaned toward calling it a commodity. But, Nigeria’s SEC thinks differently about this.

“The [Nigerian] SEC’s mandate is to protect government interests and citizens, and it is executing it appropriately here,” said Tami Koroye, a virtual asset regulation lecturer at the University of Bradford. “While Bitcoin and other early cryptocurrencies were designed as libertarian payment systems free from traditional banking, that’s simply not how Nigerians are using them today.”

Nigeria is one of just two countries—alongside Malaysia—that explicitly treat Bitcoin as a security.

While Bitcoin was designed to be money, it isn’t in most regions. Historically, only two countries, El Salvador and the Central African Republic (CAR), have made Bitcoin legal tender in 2021 and 2022, respectively. 

That quickly turned out to be a bad idea. Due to its volatility, many traders refused to accept the digital asset as a means of payment. It also undermined central banks’ ability to issue monetary policy decisions effectively because Bitcoin is decentralised and cannot be controlled. 

The International Monetary Fund (IMF) has advised both countries to overturn this rule. While El Salvador still keeps reserves in Bitcoin, both countries have reversed their decisions to make the asset legal tender.

As money, Bitcoin fails two of the three economic tests. It fails woefully as a unit of account, but it works well as an investment tool (store of value). But its utility as a medium of exchange is nuanced. While Bitcoin is no longer legal tender anywhere in the world, it still qualifies as “good enough money.” This means that two people can choose to settle in Bitcoin after value has changed hands. This is why Nigerians go after the second-best option: investment.

“The investment behaviour we’re seeing absolutely suggests these should be treated as securities,” Koroye said. “Nigeria doesn’t operate under the Howey Test framework, which means our securities classification relies on SEC experts with their cumulative years of study and experience.”

According to Koroye, an omnibus regulation that treats all cryptocurrencies as securities, until proven otherwise, is the safest first step into a market that has exploited hundreds of thousands of Nigerians. 

Some industry stakeholders note that Bitcoin is different from other cryptocurrencies. Bitcoin is the only digital asset not issued by any company or entity. Unlike cryptocurrencies which were issued by companies such as Chainlink Labs ($Link) or other blockchain-tied tokens used for lending, Bitcoin only exists through the efforts of miners; it is programmed to have only a finite amount in circulation. 

“Bitcoin is a bit of an outlier,” said Ayotunde Alabi, CEO of Luno Nigeria, the UK-headquartered crypto company operating in four African countries. “It wasn’t launched through an ICO [Initial Coin Offering], it has no central promoter, and people don’t rely on the efforts of a single entity to influence its value. Globally, that’s why many regulators treat it more like a commodity.”

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If Nigeria sticks with this blanket approach, it could come at a cost. Startups building around Bitcoin could struggle to meet licencing and compliance demands designed for traditional financial institutions. Innovation might slow, and smaller players may be pushed out altogether.

It also creates confusion around taxes. Securities and commodities are taxed differently. Securities often attract capital gains taxes, and the reporting requirements are more complex. Regular traders and businesses accepting Bitcoin payments might be unsure whether they’re liable for capital gains, value-added tax (VAT), or income tax, especially when the asset’s value changes quickly. Users may under-report or overpay, which is bad for economic participation and tax collection.

Treating Bitcoin as a security may offer short-term control, but it could introduce long-term uncertainty, both for the market and the regulators trying to govern it.

“In Nigeria’s case, the current framework is built to treat digital assets as securities, which gives the SEC oversight and the opportunity to introduce guardrails as the market matures,” said Alabi. “While Bitcoin may not neatly fit the securities definition, it makes sense that the regulatory approach here starts broad. Over time, we may see more nuanced classifications emerge as the ecosystem evolves.”

The case for commodities

Commodities are assets that have intrinsic or extrinsic value. Examples like gold, grains, and oil pass this simple litmus test. Gold can be used to make fine ornaments and actual money, and crude oil is processed to provide energy fuels. Grains (maize, rice, or sorghum) have intrinsic value because of their consumption value.

Good forms of commodity money have a stable and known value, and are easy to keep in an exchange account. These underlying factors make these commodities desirable, creating demand for them.

Bitcoins, due to their volatility, are not good units of account and do not qualify as clear, traditional commodities. The argument for its scarcity is not a strong enough case either, as something can be scarce but still not be valuable or stable if there isn’t real, consistent demand for it. However, the speculative investment opportunity in Bitcoin helps it to retain demand. 

While Bitcoin does not have intrinsic value like physical commodities, it has a unique digital intrinsic characteristic that is considered valuable. The digital asset is the most recognised instrument of value that can be transmitted across the internet without needing permission from specific intermediaries.

Extrinsically, Bitcoin is driven by price mobility—ironically, one of the reasons why it is not a clear commodity—demand, utility, and societal trust, which drives network effects. Per River, a Bitcoin financial services company, 4% of the world’s population—about 320 million people—holds Bitcoin. As more people buy, trade, or hold Bitcoin, it becomes easier for new users to participate. The presence of this large user base provides greater liquidity and more potential transaction partners.

Yet, a commodity classification has its tradeoffs. In traditional commodity markets, like gold or oil, regulators have clearer oversight over both futures and spot markets. Bitcoin is mostly traded on spot markets, which are the regular markets where people buy and sell the actual asset. These markets are not fully regulated in many countries, including Nigeria. That makes it difficult to track price manipulation or protect everyday users from unfair practices.

Even in countries like the US, where Bitcoin exchange-traded funds (ETFs) are allowed and operate under strict rules, those ETFs still get their prices from the global Bitcoin spot market. If the spot market is unstable or influenced by offshore activity, that instability can flow directly into regulated investment products.

“Nigeria has a huge peer-to-peer market,” said Olayimika Oyebanji, a lawyer and head of growth at Arcus BTC, an institutional Bitcoin lending platform. “So there’s a big question around the SEC’s [ability] to regulate that market.” Oyebanji pointed to the EU’s Markets in Crypto-Assets (MiCA) framework as a more structured approach—one that categorises crypto assets into three groups: electronic money tokens (EMTs), asset-referenced tokens (ARTs), and “other tokens.” 

Bitcoin falls into the last group, Oyebanji explained, because it doesn’t fit as an EMT or ART. 

“MiCA doesn’t regulate Bitcoin directly; it regulates what people do with it, through service providers,” he said. “That’s what you expect from a comprehensive framework. It’s really going to make sense if Bitcoin is classified as a commodity, not a security.”

Yet, this setup means that while a “commodity” label might reduce regulatory pressure and encourage innovation, it doesn’t remove the risks. A weakly supervised market—especially one so dependent on global price signals—can still expose users to fraud, volatility, and misinformation.

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Is a hybrid model the future?

A third school of thought proposes a middle ground, one that adjusts regulation based on how Bitcoin is actually used.

Oluwasegun Kosemani, convener of the Naija Bitcoin Conference and chief bitcoin officer of Bitcoin retail startup Botmecash, argues that Bitcoin should fall under a hybrid regulatory approach—neither fully representative money nor strictly property, but a combination of both.

“Bitcoin should be treated uniquely,” he said. “It can be a store of value like a commodity, but also used in transactions like money. So regulation must reflect both ends, depending on what use case is being served.”

This use-based approach is gaining traction in countries like Switzerland and Japan. In Switzerland, the legal classification of a cryptocurrency depends on its use. If it’s used for payments, it’s treated differently than if it’s used as an investment or utility.

In the European Union, the MiCA regulation takes a similar approach. It doesn’t treat all crypto assets the same. Instead, it creates separate rules—some based on financial regulations, others more like commodity regulations—depending on the nature of the asset and how it functions. Japan also has a framework that adjusts regulatory treatment according to purpose, showing that hybrid approaches are moving from theory into practice.

Bitcoin is part money, part commodity, and part speculative money. Shoehorning the digital asset into one definition can be limiting; regulation should follow how the use cases evolve, rather than a blanket approach.

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Analysis
Bitcoin
Cryptocurrency
Bitcoin regulation
commodities
cryptocurrency
Howey Test
SEC
securities

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