When the cross-border insolvency framework in Nigeria is examined, it becomes clear that it is structurally incapable of addressing the unique challenges posed by stablecoins and global exchanges.
Nigeria has become one of the world’s most active crypto markets, with millions of citizens relying on stablecoins for savings, remittances, and everyday transactions. Yet this rapid adoption has outpaced the country’s legal and regulatory preparedness. As global experience shows—from Mt Gox to FTX—centralised exchanges can and do collapse, often spectacularly, leaving users scrambling to recover their assets across multiple jurisdictions. When the cross-border insolvency framework in Nigeria is examined, it becomes clear that it is structurally incapable of addressing the unique challenges posed by stablecoins and global exchanges. The following analysis begins with the foundational question of how stablecoins should be legally classified and extends to the broader issues of jurisdiction, recognition of foreign proceedings, and fair distribution of stable assets to creditors.
The legal identity crisis: What exactly is a stablecoin?
Before courts can determine ownership, trace transactions, or distribute assets in insolvency, they must first decide whether stablecoins are property, currency, or something else entirely. In Nigeria, the legal status of stablecoins remains ambiguous.
The only laws that address them are the Investments and Securities Act 2025, which classifies digital assets as securities, and the Finance Act 2023, which treats them as taxable property. However, both statutes operate within their specific domains and neither specifically delineates their legal character within the common law framework. Similarly, although the Secured Transactions in Movable Assets Act defines movable assets broadly enough to include intangible property, its silence on crypto assets leaves their classification dependent on judicial interpretation. The Rules on Issuance, Offering Platforms and Custody of Digital Assets 2022 and the Amended Digital Assets Rules 2024 require exchanges to segregate customer assets. While the regulatory safeguard implies a trust-like structure, it still falls short of an explicit statutory declaration that stablecoins constitute property. Nigerian courts have implicitly treated stablecoins as seizable assets under anti-fraud and constitutional provisions, but these decisions do not clarify whether stablecoins are choses in possession or choses in action.
As a result, their proprietary status in insolvency remains unresolved. This ambiguity exposes creditors of an insolvent exchange to the risk of being treated as unsecured creditors. It also creates uncertainty in recovery and valuation: if stablecoins are treated as currency, liquidators must recover their naira equivalent, whereas if treated as property, the assets themselves may be recoverable. Without explicit statutory guidance, outcomes remain unpredictable, undermining creditor protection and legal certainty.
Territoriality in a borderless digital economy
The Nigerian approach to cross-border insolvency is rooted in territoriality. The Federal High Court handles corporate insolvency matters, and its jurisdiction extends only to companies registered in Nigeria and assets located within its borders. This framework works for local exchanges and for global exchanges with Nigerian subsidiaries, but it breaks down completely when the exchange in question is a global platform with no Nigerian registration. Such platforms operate without physical presence, hold user assets in offshore wallets, and often lack transparent corporate structures. When one of them collapses, Nigerian users have no clear forum in which to assert their claims, and Nigerian courts have no jurisdiction to intervene. The intangible nature of stablecoins adds another layer of difficulty. Because they have no physical location, determining their situs for jurisdictional purposes becomes nearly impossible. The territorial principle, which determines jurisdiction by reference to the location of the asset, offers little guidance in a digital environment where assets exist on distributed ledgers.
The recognition problem: The absence of mechanisms for international insolvency cooperation
Crypto insolvencies almost always involve multiple courts and competing claims. The collapses of Mt Gox and FTX triggered proceedings in several jurisdictions, coordinated through modern cross-border insolvency mechanisms. Nigeria, however, lacks an adequate recognition framework as it has not adopted the UNCITRAL Model Law, and recognition is based on its private international law rules which prioritise territoriality and reciprocity. As a result, Nigerian creditors risk being excluded from global recovery efforts, with no legal pathway for cooperation that ensures effective asset recovery and fair distribution.
Fair distribution: The unresolved challenges of comingling, valuation, and concealment of stablecoin assets
Even if Nigeria could assert jurisdiction, three crypto-specific problems would still undermine fair distribution: (i) comingling, (ii) valuation, and (iii) concealment of assets. Comingling is widespread, as exchanges often pool customer assets in omnibus wallets, making it difficult to trace ownership or establish trust relationships. Valuation is equally problematic, as stablecoins can fluctuate and lose their peg or vary across markets, and Nigerian law provides no guidance on valuation methodology or timing. Concealment is perhaps the most troubling issue, as stablecoin assets can be easily hidden through mixers, chain-hopping, and destruction of private keys, rendering traditional insolvency tools ineffective.
Conclusion
The foregoing analysis reveals a stark reality: the current Nigerian legal framework is not equipped to address the complex, borderless, and technologically sophisticated issues that arise when centralised exchanges holding stablecoins become insolvent. Without reforms that clarify the legal status of stablecoins, modernise cross-border insolvency mechanisms, and address the unique risks of stablecoin assets, Nigerian users remain dangerously exposed to the next major crypto collapse. While my current research identifies the legal gaps in the Nigerian cross-border insolvency legal framework, the central questions are: at what level would reforms be desirable? Could Nigerian legal reforms solve the issues? These remain open questions that my PhD aims to explore further.
*This research blog was written by Nkem Amadike Doctoral Student at Nottingham Trent University
About BWILC and the PhD Workshop
This research was presented and discussed at the last PhD Workshop on European and International Insolvency law, organised by the Stichting Bob Wessels Insolvency Law Collection (BWILC). Since 2018, BWILC maintains the private insolvency law book collections of Prof. em. Bob Wessels, extended with the collections of the late Prof. Ian Fletcher and the late Gabriel Moss QC, in addition to books that have been kindly donated by scholars and practitioners from around the world. To browse or visit this unique collection, click here.
Since 2019, BWILC organises an annual PhD Workshop for PhD students from Europe and beyond. At this workshop, PhD candidates can present their ideas, but also the challenges and questions they are confronted with in a two-day workshop attended by their peers and senior academics. At the end of the workshop, organised alternately in Leiden and another city, prizes are awarded for the best presentations.