Written by Loba Agboola.
For many Nigerians facing financial exclusion or distrust in traditional banks, cryptocurrency has emerged as an alternative store of value and transaction means. Many have turned to it as a more stable alternative to traditional banking due to currency instability, high inflation rates, and a lack of access to financial services in the country. The adoption rate in Nigeria has been so high that Nigeria ranked second in the 2023 Global Crypto Adoption Index, showing how valuable access to cryptocurrency is to Nigerian citizens.
However, in recent years, Nigeria has maintained a cautious and at times hostile stance toward cryptocurrency and virtual assets. In 2017, the country’s financial regulator, the Central Bank of Nigeria (CBN), issued a circular to financial institutions instructing them to avoid holding, using and trading cryptocurrencies. This was followed by a press release in 2018 and stringent restrictions in 2021, which explicitly directed all regulated financial institutions to stop processing and enabling transactions in virtual currencies. The Securities and Exchange Commission (SEC) also supported the Central Bank’s directive by barring entities impacted by the CBN’s circular from entering its Regulatory Incubation Framework—effectively preventing them from engaging in any legal activities within the Capital Market.
These harsh restrictions imposed by the CBN left a lasting scar on the domestic cryptocurrency ecosystem and, worse still, jeopardised Nigeria’s potential leadership in the global cryptocurrency industry. Before the 2021 CBN restriction, many local crypto-based startups like Bitfxt, LocalBitcoins, and Paxful were operational, profitable, and capable of establishing Nigerian dominance in the global cryptocurrency field. This prospect was promising, as Blockchain technologies are estimated to generate $1.76 trillion for the global GDP by 2030.
Strong leadership in a lucrative, emerging field like cryptocurrency trading would have significantly enhanced national income, tax revenue, employment, and, more importantly, global competitiveness, which is aligned with the goals of the current National Blockchain policy issued by the Nigerian government.
But unfortunately, these hopes were squashed by the regulator’s aversion to the adoption and usage of virtual currency. Many promising startups in Nigeria buckled under the arid regulatory environment and stiff global competition from companies like Binance, Huobi, and OKX over Nigeria’s burgeoning market.
But Why Did The Regulators Need to Take Such Drastic Measures?
While the restriction on the use of cryptocurrency might be harsh, the regulators’ concerns are not unfounded. The use of an unregulated virtual currency poses very significant risks to the economy. Digital currency, more specifically, cryptocurrencies are issued by unregulated entities, and the resulting transactions are hard to track, making it the perfect tool for illegal transactions like money laundering, terrorism financing and tax evasion. Even local criminals exploit this by demanding ransoms in the form of cryptocurrency to receive payments anonymously. Although those who misuse cryptocurrency for illegal activities represent a small fraction of its overall users, there is still a need for a stern regulatory framework on this new technology to prevent misuse and ensure the general public’s safety.
Another pertinent issue with the widespread adoption of cryptocurrency is that it challenges existing regulatory and monetary frameworks in the country. Cryptocurrencies offer an alternative to Nigeria’s existing financial and monetary system, and their anonymity makes it hard to enforce compliance with anti-money laundering, know-your-customer, and counter-terrorist financing (CTF) regulations. This is a threat because if cryptocurrencies gain widespread adoption without a corresponding regulatory framework, Nigeria could lose control of key levers of economic control, which will eradicate its ability to manage inflation, respond to crises, and regulate the economy.
Nigeria’s Slow Embrace of Emerging Technologies
Nigeria’s policy space is slowly but steadily turning a new leaf regarding its approach to emerging technologies like cryptocurrency. As indicated by the National Digital Economy Policy and Strategy (2019), the Nigerian government is committed to the growth of digital technology as a tool for economic development and global competitiveness.
Unsurprisingly, after a year of CBN’s restriction on cryptocurrency businesses, the SEC released the Digital Assets Rules, Nigeria’s first attempt at a comprehensive regulation of digital assets in the country. This move was part of its commitment to regulating digital asset trading and promoting investor protection. However, the SEC later clarified that the digital asset rules do not apply to cryptocurrencies until they are formally deemed legitimate by the appropriate financial regulator.
Subsequently, the federal government released the National Blockchain Policy as a part of the larger National Digital Economy Policy and Strategy in 2019. This policy affirmed the Nigerian government’s commitment to the utilisation of blockchain technology for talent development, innovation and widespread adoption in key areas of the economy like government services, corporate digital services and financial inclusion through cryptocurrency. Yet, despite the policy’s ambition, crypto transactions remained effectively illegal under prevailing CBN regulations.
These attempts at formalising and supporting emerging technology, such as blockchain and digital assets, demonstrate that rather than outright rejecting cryptocurrency, the government does recognise its value in achieving its broader development goals. However, the necessary regulatory framework to manage and mitigate the associated risks remains largely absent.
In 2023, the Central Bank of Nigeria took a significant step by releasing the Virtual Assets Service Providers (VASPs) guidelines and relaxing its restrictions on cryptocurrency businesses. While financial institutions remain barred from direct cryptocurrency trading, they are now allowed to facilitate transactions for crypto businesses provided those businesses comply with the requirements set out in the VASP guidelines, one of which requires crypto businesses to obtain a license from the Securities and Exchange Commission.
Shortly after this, the SEC shifted its stance on the status of cryptocurrency as a virtual asset and proposed an amendment to the Digital Assets Rules, which validated cryptocurrencies as a legitimate class of digital assets. This shift also implied that the Commission’s earlier position may have been influenced more by the CBN’s posture than by its own independent assessment.
Concurrently, the passage of the new Investment and Securities Act (ISA) 2025 further entrenched this change by defining virtual and digital assets, including cryptocurrencies, as securities, bringing them explicitly under the SEC’s regulatory oversight.
The release of the VASP Guidelines and Digital Assets Rules signalled a shift in regulatory tone, fostering optimism towards a future of a safe and more structured cryptocurrency industry in Nigeria. These regulations tackled key risks, such as money laundering, terrorism financing, and fraud, by introducing licensing requirements, documentation standards, and robust anti-money laundering/counter-terrorism financing provisions, thereby laying the foundation for safe integration of cryptocurrency adoption into the national economy in alignment with the national blockchain policy.
Concluding
In the next two decades, the pace and impact of emerging technology are likely to increase, leading to the development of solutions that are as transformative and productive as they are potentially risky. If Nigeria is to position itself as a true digital economy leader in Africa, it must adopt a more tactical and comprehensive approach to regulation, one that safeguards national interests without stifling innovation or startup growth.
In this case, regulators struggled with implementing adaptive, pro-innovation policies to manage the risks of rapid cryptocurrency adoption in Nigeria, and instead defaulted to blanket restrictions that undermined the very development goals they sought to achieve. Moving forward, involved regulatory bodies should be more equipped to collaboratively address upcoming risks through pro-innovation alternatives like regulatory sandboxes and consultative forums.
Policy implementers like the National Information Technology Development Agency (NITDA) are actively adopting these strategies with the National Blockchain Policy Steering Committee and have organised a co-creation workshop for the implementation of the policy initiatives.
