The Legal Feasibility of Blockchain-Based Cryptocurrency Insurance in Nigeria

Abstract

The theft of over $2.3 billion from the Bybit exchange, the repeated collapse of stablecoins such as TerraUSD, and the loss of private keys leading to inaccessible wallets, as seen in the QuadrigaCX case, are stark reminders of the vulnerability of digital assets. These incidents underscore an urgent need for insurance mechanisms tailored to cryptocurrency risks. Yet, despite Nigeria being a leading cryptocurrency market with over 26 million digital asset users, its insurance infrastructure remains underdeveloped. This paper examines the legal feasibility of blockchain-based cryptocurrency insurance in Nigeria. Using doctrinal and comparative analysis, it evaluates whether Nigeria’s legal framework, including the Insurance Act 2003, Investment and Securities Act 2025, Evidence Act 2011, and regulations from NAICOM and SEC, can accommodate such products. It also assesses the validity of smart contracts under Nigerian contract and evidence law. Comparative insights are drawn from the UK, EU, Singapore, and Kenya. The paper identifies key legal gaps: the lack of statutory recognition of digital assets as insurable property, regulatory restrictions on crypto transactions by insurtechs, uncertainty over the enforceability of smart contracts, and the absence of a bespoke blockchain-insurance framework. It concludes that while conceptually feasible, operationalising blockchain-based cryptocurrency insurance requires substantial legislative and regulatory reforms. Recommendations include amending the Insurance Act to recognise digital assets as insurable, issuing NAICOM-specific guidelines, clarifying smart contract validity by legislation, and adopting a risk-based capital framework for crypto-insurance exposures.

Keywords: Blockchain, Cryptocurrency Insurance, Insurtech, Smart Contracts.

DOI: 10.7176/JLPG/152-08

Publication date: May 28^th 2026