Name
Global FinTech Guide
Country _ Name
Nigeria
SectionTitle
DLT and cryptocurrencies
Body
FinTechs belonging to this category offer financial services using crypto currencies. This category also includes FinTechs utilising blockchain and distributed ledger technologies (DLT) upon which Bitcoin and Ethereum are based, among others. FinTechs develop and do research in this field in order to create new services – e.g. crypto currency exchange markets, wallet providers, NFTs-related services, new payment services, "smart contracts" or new clearing and settling services.

Introduction

Attitude of the country towards financial services using crypto currencies

The attitude of the country, particularly the CBN – which is the apex regulator of financial services in the country – has been mixed. In February 2021, the CBN via a letter to all banks and other financial institutions in Nigeria restricted banks and other financial institutions from operating accounts for cryptocurrency service providers. Despite these restrictions, the SEC, in 2022, released its rules on issuance, offering platforms and custody of digital assets which regulates the issuance of digital assets as securities to the public and the registration of Virtual Assets Service Providers (“VASPs”), digital assets exchanges, digital asset custodians, and digital asset offering platforms in Nigeria.

However, on December 2023, the CBN released its Guidelines on Operations of Bank Accounts for Virtual Asset Service Providers (VASPs) (the “Guidelines”), where it reversed its earlier position on the operation of bank accounts linked to or that facilitated payments for cryptocurrencies. By the Guidelines, the CBN acknowledges the need to regulate the activities of virtual assets service providers of which crypto asset and crypto currencies are a part.

Further to the CBN’s attempt to regulate DLT and cryptocurrencies, around the second quarter of 2024, the CBN discovered that crypto traders use peer-to-peer trading to manipulate the naira via a pump-and-dump strategy and has adopted a more rigid stance by working with FinTechs to ban peer-to-peer form of crypto trading. Popular FinTechs in Nigeria have issued notices to their customers to desist from such acts.

On June 21, 2024, the SEC issued a Framework on Accelerated Regulatory Incubation Program for the onboarding of VASPs and Digital Investment Service Providers ("DISPs”) in Nigeria (the “ARIP Framework”). The goal of the ARIP Framework is to provide guidance to VASPs and DISPs on the SEC’s regulatory requirements before they commence full operations in Nigeria’s capital markets, and to help the SEC better understand digital asset offerings in order to ensure effective oversight. Following the launch of the ARIP Framework, the SEC granted AIP to two digital assets exchanges: Quidax and Busha, as well as four digital asset offering platforms (Trovotech, HousingExchange, Dream City Capital and Wrapped CBDC) and one digital asset custodian (Blockvault Custodian).
Additionally, in the ISA which was passed into law in March 2025, the definition of securities was expanded to include virtual and digital assets which covers cryptocurrencies (Section 357 of the ISA). Accordingly, cryptocurrencies are formally recognized as legal assets in Nigeria and can be regulated by the SEC.


Legal affairs

Obligations and requirements to provide financial services using crypto currencies described above

FinTechs belonging to this category must comply with the Guidelines. The Guidelines regulates the opening, operations and use of bank accounts by VASPs and Digital Assets (DA) entities and sets out the minimum standards and requirements for banking business relationships and account opening for these entities. VASPs include entities that conduct activities and operations relating to exchange between virtual assets and fiat currencies; exchange between one or more forms of virtual assets; transfer of virtual assets, safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets, and participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.

By the Guidelines, the permissible activities for financial institutions in their operations of accounts for VASPs are: opening designated accounts; providing designated settlement accounts and settlement services; act as channels for FX flows and trade; and any other activity permitted by the CBN. Designated accounts shall only be opened with the approval of senior management of the financial institution. The Guidelines further sets out the account opening/documentation requirement for a designated account which includes: evidence of a valid license issued by the SEC for the entity to engage in the business of VASP/Digital Asset Exchange/Digital Asset Offering Platform; certified true copy of the memorandum and article of association among others.

Furthermore, an account opened in accordance with the Guidelines shall be subject to some restrictions. They are: the account shall only be used for transactions on virtual/digital assets and not for any other purpose; no cash withdrawal shall be allowed from the account; no third-party cheque shall be cleared from the account; and except for settlement of a virtual/digital assets transaction which shall be done through a transfer to another designated account, withdrawal shall be only through a Managers’ Cheque or transfer to an account.

The Guidelines also require financial institutions to monitor, on a continuous basis, all activities conducted in designated accounts opened in accordance with the guidelines as well as make reports to the relevant supervisory department of the CBN on the accounts. Also, note that by the guidelines, a designated account will be declared dormant if no customer induced transaction is carried out for three (3) consecutive months and such dormant account shall be closed forthwith.

Additional comments regarding the legal situation for financial services using crypto currencies or what FinTech’s must be aware of in this business area
In recent times, the cryptocurrency space has been under heavy scrutiny by the CBN. In a bid to regulate, the CBN has over time issued guidelines and has also demanded compliance from FinTechs. FinTech institutions dealing with crypto currencies in any form should ensure due compliance with the Guidelines. They are also required to maintain and be guided by robust KYC/AML policies. This is to mitigate against financial fraud including financing terrorist activities. The KYC/AML policy of every FinTech Company must be in line with requirements provided by existing laws, regulations, and international best practices.


Economic conditions

Market size for financial services using crypto currencies and biggest companies in this business area

The Nigerian crypto currency usage remains the highest in Africa. According to Statista, the digital assets market in Nigeria is projected to grow by 11.51% (2024 - 2028) resulting in a market volume of $83160.0K in 2028. Also, the revenue in crypto currencies is expected to show an annual growth rate (CAGR 2024-2028) of 12.66% resulting in a projected total amount of $52.5m by 2028.

Some of the biggest companies in the Nigerian crypto currency industry includes: Binance, Luno, Quidax, ByBit, NairaEx among others.

Additional comments regarding the economic situation for financial services using crypto currencies or what FinTech’s must be aware of in this business area

With the current economic situation in Nigeria which has seen the devaluation of the Naira and the fluctuations of foreign exchange rates, there has been some sort of crackdown on crypto currency services. This has resulted in some uncertainty in the industry with the players unsure as to the exact plan of the government. FinTechs must pay attention to this uncertainty and exercise caution in undertaking its crypto related activities.



Authors

NameOrganisationEmail
Ebimobowei JikenghanG Elias[email protected]06346
Eberechukwu Ezike [email protected]0 

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