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Moving from prohibition to regulation, what’s next for crypto in Nigeria? 16 Jun 2025

Nigeria's relationship with cryptocurrency has been a complex and evolving narrative. Once marked by outright bans and regulatory skepticism, the country has recently taken significant strides towards formal recognition and regulation of digital assets. The enactment of the Investments and Securities Act (ISA) 2025 marks a pivotal moment in this journey, signaling a shift from prohibition to structured oversight. 

In February 2021, the Central Bank of Nigeria (CBN) issued a directive prohibiting financial institutions from facilitating cryptocurrency transactions. The stated rationale – combating money laundering, terrorism financing, and volatility – was grounded in regulatory prudence. Yet the effect was paradoxical: by severing ties with formal financial channels, the directive inadvertently pushed crypto activity underground, amplifying the very risks it sought to suppress. Peer-to-peer platforms flourished in this vacuum, exposing users to fraud and removing any semblance of oversight.

This heavy-handed approach also jarred with Nigeria’s own forward-looking digital ambitions. As early as 2019, the Federal Ministry of Communications and Digital Economy had unveiled the National Digital Economy Policy and Strategy (2020–2030), with “Developmental Regulation” enshrined as its first strategic pillar. Regulation, in this context, was not to stifle progress but to facilitate it. The CBN’s ban stood in stark contradiction to this ethos, casting a shadow of uncertainty over the digital financial space. 

Despite the “crypto ban”, Nigeria emerged as one of the leading countries in cryptocurrency adoption. The youth-driven demand for alternative financial solutions, coupled with the need for efficient cross-border transactions, made digital assets increasingly indispensable. Recognising this trend, the Securities and Exchange Commission (SEC) in 2022 released rules on the issuance, offering, and custody of digital assets. These guidelines aimed to bring clarity to the crypto space, introducing requirements for Virtual Asset Service Providers (VASPs) and effectively setting the stage for more comprehensive regulations. Despite these guidelines, the CBN directive/ban created regulatory uncertainty over cryptocurrency and other digital assets in the country. This was further fueled by the seeming antithesis nature of the CBN ban to the government’s digital economy policy at the time.

By 2023, over one-third of Nigerians were reportedly invested in crypto, placing the country second globally in adoption rates behind India. Diaspora remittances increasingly bypassed traditional, costly corridors in favour of blockchain-based transfers. Nigeria, though operating in a regulatory grey zone, had become a global epicentre of decentralised finance.

Weeks after he announced the removal of petrol subsidies at the start of his tenure in May 2023, President Bola Tinubu floated Nigeria’s national currency, the naira, thereby allowing market forces to determine its value. The naira has since depreciated against the dollar by nearly 70%, driving inflation to a three-decade high. The hike in the cost of living further pushed a growing number of young Nigerians to seek refuge from the weak naira in cryptocurrencies, some of which are seen as a more reliable store of value or a means of quickly increasing wealth.

But this appetite for cryptocurrencies, which by nature are transnational, has been a headache for Nigerian policymakers. Sensing the inevitability of change, Nigerian regulators began to pivot. Apart from SEC’s more adoptive stance, a more decisive moment came in December 2023, when the CBN – following the global standards set by the Financial Action Task Force (FATF) – released its Virtual Asset Service Providers (VASPs) guidelines. These allowed financial institutions to support crypto businesses that obtained SEC licenses, signaling a nuanced thawing of previous restrictions. Notably, while banks remain barred from directly trading cryptocurrencies, they could now facilitate crypto-related operations under strict compliance conditions.

This is perhaps why the passage of the ISA 2025 into law appears to be a watershed moment. Under the new law, for the first time, virtual assets and investment contracts have been formally recognised as securities under Nigerian law. This recognition has brought cryptocurrencies under the regulatory purview of the SEC, granting the commission authority over the issuance, trading, and promotion of digital assets. The Act also brings the VASPs, Digital Asset Operators (DAOPs), and Digital Asset Exchanges under the SEC’s regulatory purview. 

Under the ISA 2025, virtual assets are classified as securities, subjecting them to existing securities laws and regulations. It establishes frameworks for digital asset exchanges, clearing houses, and trade depositories. Entities involved in digital asset services are required to register with the SEC, ensuring compliance with stipulated standards. The Act also introduces stringent penalties for fraudulent activities, including Ponzi schemes, thereby enhancing investor confidence.

Crucially, the ISA 2025 doesn’t merely acknowledge crypto – it embeds it within Nigeria’s financial legal architecture. It sets out standards for exchanges, clearing houses, and trade depositories, and enforces stringent penalties for fraudulent schemes. This regulatory clarity could inspire confidence among investors and innovators alike.

Yet, legislation alone cannot resolve the systemic fragmentation that has long characterised Nigeria’s digital finance governance. Regulatory dualism – exemplified by overlapping mandates between the CBN and SEC – has generated confusion, uncertainty, and inefficiency. VASPs remain classified as a “financial institution” under the Money Laundering (Prohibition and Prevention) Act. For digital assets to truly flourish, Nigeria must evolve from fragmented rule-making to a unified, coherent policy framework.

Such a framework should integrate the adaptive strengths of regulatory intervention with the long-term stability of legislative anchoring. Rapid developments in blockchain technology demand nimble, responsive oversight – something that statutory instruments alone cannot always provide. Frequent, consultative, and agile regulatory adjustments will be essential.

Furthermore, policy coherence must prioritise consumer protection. As more Nigerians engage with digital assets, ensuring robust safeguards against fraud, data breaches, and financial exploitation will be imperative. Clear avenues for redress and accountability mechanisms will help anchor public trust in the system.

The National Digital Economy Policy recognises that siloed regulation is antithetical to a thriving digital ecosystem. It advocates for "converged regulation" – a model in which regulators co-author frameworks and harmonise oversight. To this end, Nigeria would benefit from a dedicated inter-agency task force on digital assets, ideally housed within the National Information Technology Development Agency (NITDA). Such a body could coordinate efforts across the CBN, SEC, NITDA, and other stakeholders, ensuring consistency, reducing friction, and fostering innovation.

Nigeria’s evolution from a prohibitive to a permissive stance on cryptocurrency reflects a broader awakening to the promises – and perils – of financial innovation. The ISA 2025 is an important milestone, but it must be part of a broader strategic vision. As digital assets continue to redefine the global financial order, Nigeria must position itself not merely as a reluctant participant, but as a proactive architect of its digital future.

To achieve this, regulatory cohesion is not just desirable – it is imperative. A clear, coordinated, and forward-looking policy framework will empower the country to harness the full potential of digital finance: driving inclusion, catalysing innovation, and securing Nigeria’s place in the digital economy of tomorrow.

Funmilayo Odude is Partner at Commercial and Energy Law Practice (CANDELP).