Nigeria’s securities regulator is taking a strong step to make cryptocurrency safer for everyday users. The Securities and Exchange Commission has proposed new rules that would force crypto firms and digital asset custodians to store at least 80 per cent of their customers’ cryptocurrency holdings in cold storage. This means the bulk of those assets would stay offline, far from the reach of internet-connected systems that hackers often target.
The proposal forms part of a wider set of rules on digital and virtual asset operations, custody and markets. It was released for public comment in August 2026. The rules aim to bring greater order and protection to a sector that has grown rapidly across Nigeria and the rest of Africa, where many people turn to crypto as a way to save, send money, or protect value against currency swings.
How Cold Storage Ensures Greater Safeguard for Crypto Users
Cold storage keeps private keys and digital assets completely disconnected from the internet. Think of it as locking money in a physical safe that cannot be opened remotely. Hot wallets, by contrast, stay online so that people can trade or withdraw funds quickly. Those online wallets are convenient but also more exposed to cyber attacks, phishing, or internal failures.
Under the proposed rules, a digital asset custodian must hold no less than 80 per cent of client assets in cold storage. The remaining portion may stay in hot or warm wallets, but only in amounts needed for daily withdrawals, settlements, and transaction processing. Those online holdings would face tighter controls, monitoring, and risk measures such as insurance or fidelity bonds.
This requirement is designed to reduce the chance that a single hack or system failure could wipe out most of a customer’s holdings. In recent years, crypto platforms around the world have suffered large losses when online wallets were compromised. Nigerian users have also faced periods of uncertainty, frozen accounts, and platforms that suddenly restricted access. By insisting that most assets stay offline, the regulator wants firms to prioritise safety over speed of operations.
Broader Safeguards in the Proposed Rules
The cold storage rule does not stand alone. Custodians must keep customer assets completely separate from the company’s own funds. This segregation means that if a firm runs into financial trouble or collapses, customer crypto should not be mixed with the company’s debts or used to cover its losses.
Firms would also need strong systems for managing private keys, controlling who can access wallets, reconciling records regularly, and proving that the assets they claim to hold actually exist. Larger custodians may have to provide periodic proof-of-reserves or similar attestations so the regulator and the public can verify that client assets match the liabilities on the books.
Companies must report serious problems. Major losses, cyber incidents, or other operational failures would have to be disclosed to the Securities and Exchange Commission. This transparency is meant to stop small problems from growing into crises that leave users unable to recover their money.
The rules apply widely. They cover not only local Nigerian firms but also any company that operates in Nigeria, serves residents of the country, or targets Nigerian investors through digital channels. Offshore platforms that currently serve Nigerian users without local registration would need to seek authorisation or adjust their approach. Local presence requirements, including incorporation in Nigeria and a resident chief executive in some cases, form part of the framework.
Minimum capital thresholds are also high for certain categories. Digital asset exchanges and custodians face a proposed minimum capital of two billion naira, along with registration fees and fidelity insurance bonds. These capital floors aim to ensure that only firms with solid financial backing can hold customer assets at scale.
A Shift Towards Formal Regulation for Crypto Trading
The current direction marks a clear shift toward formal regulation rather than outright restriction of cryptocurrency trading. Nigeria has one of the most active crypto communities on the continent. Many people use digital assets for remittances, as a hedge against inflation or currency volatility, and for peer-to-peer trading when traditional banking channels face limits. Past regulatory actions, including temporary restrictions on bank accounts linked to crypto, created disruption and forced many users and startups to adapt. Some local platforms closed or pivoted. Others found ways to continue through informal channels or offshore services.
Classifying virtual assets as securities under the Investments and Securities Act and giving the Securities and Exchange Commission clear authority, Nigeria is a significant step towards building a supervised market. The cold storage requirement sits at the heart of the investor-protection side of that effort.
The move offers a useful signal that regulators across the continent are watching how large markets handle digital assets. Rules that emphasise offline storage, asset segregation, and proof of reserves can serve as practical models. They show that governments can encourage innovation while still demanding basic safeguards that ordinary savers and traders need.
Read Also: How Regulations Are Helping or Harming Tech Ecosystems in Africa
How Consequential is this Policy for Nigerian Crypto Firms and Users?
Crypto companies that currently hold most assets in online systems would need to invest in cold storage infrastructure. This could mean greater use of hardware wallets, air-gapped systems, and multi-signature arrangements that require more than one person to approve large movements of funds. Demand for specialised offline storage solutions may rise.
Users should benefit from lower risk of total loss in a cyber attack. At the same time, withdrawals might sometimes take longer if funds need to be moved from cold storage. Firms will have to balance the 80 per cent offline rule with the need to keep enough liquidity online for normal customer activity.
The proposal also covers stablecoins and other tokenised assets. Different reserve requirements apply depending on whether a stablecoin is backed by the naira, foreign currency, commodities, or other crypto. These rules seek to ensure that claims of full backing are real and verifiable.
Public comments on the draft rules were invited for a short window after the August 2026 release. Once finalised, the framework will shape how custodians, exchanges, and other virtual asset service providers operate in Nigeria for years to come.
Safeguarding Customer Assets as a Priority
The 80 per cent cold storage rule is a concrete expression of the view that customer assets deserve strong protection. By requiring most holdings to stay offline, Nigeria’s securities regulator is telling crypto firms that convenience and growth cannot come at the expense of basic security. For a country where millions of people already use digital assets in daily life, this focus on safeguarding what users entrust to platforms is both timely and necessary.
As the rules move from proposal to enforcement, the real test will be consistent application and clear guidance so that legitimate firms can comply without unnecessary friction. If implemented carefully, the measures can help build lasting trust in Nigeria’s digital asset market and offer a practical example for other African countries navigating the same path.
