Illegitimate Cryptocurrency Peer-to-Peer Transactions in Nigeria May Face a Restriction according to the Securities Commission Head
Nigeria's Regulatory Approach to Cryptocurrency: A Shift Towards Regulation, Not Ban
Nigeria's approach to cryptocurrency has been a topic of interest in recent times, with a focus on regulation rather than an outright ban. This shift became evident in February 2022, when Binance employees were arrested in connection with the country's crackdown on cryptocurrency activities.
Following the arrest, Binance discontinued its peer-to-peer feature for Nigerian users. However, the Nigerian Securities and Exchange Commission (SEC) has not explicitly implemented a ban on the use of the Nigerian naira on peer-to-peer (P2P) cryptocurrency platforms.
Instead, the SEC has been working towards formalising the crypto space through licensing under the Investment and Securities Act 2025 (ISA 2025). This act treats cryptocurrencies as securities and aims to regulate them with investor protection and market integrity in mind.
In August 2024, the SEC began granting provisional crypto licenses to crypto firms, including P2P platforms, signalling a move towards bringing crypto activity under regulatory oversight.
The Central Bank of Nigeria (CBN) has maintained a ban on banks facilitating crypto transactions, which indirectly affects fiat-crypto onramps such as naira deposits and withdrawals. However, Nigerians continue to use P2P platforms extensively for crypto trading, often circumventing banking restrictions.
Despite the CBN's banking restrictions, Binance and other major exchanges have faced operational restrictions, such as suspension of naira trading on P2P platforms and blocked access. However, Nigerians can still trade crypto-to-crypto and use P2P mechanisms, sometimes with VPNs due to website blocks.
Recently, four fintech startups in Nigeria were directed to block accounts of customers engaging in cryptocurrency transactions and report the transactions to law enforcement agencies. This move further emphasises the regulatory focus on the crypto space in Nigeria.
In summary, while banking restrictions and platform-specific limitations affect naira utilization on P2P crypto platforms, there is no current formal SEC ban expressly forbidding the use of the Nigerian naira on P2P cryptocurrency exchanges. Instead, the emphasis remains on establishing regulatory frameworks and licensing, with ongoing tension between the CBN's banking restrictions and the market reality of widespread P2P crypto trading.
The country's foreign exchange woes have put the CBN's initial interest in working with the crypto market on hold, as the government focuses on stabilising the economy. However, the regulatory developments have focused on stablecoin regulation and integrating digital assets into the formal economy, emphasising investor protection and innovation.
- The shift in Nigeria's regulatory approach towards cryptocurrency is not restrictive, but rather aims to regulate the fintech industry, particularly startups.
- Actions taken by authorities such as the arrest of Binance employees and the discontinuation of peer-to-peer features for Nigerian users have not led to an outright ban on the use of cryptocurrency in Africa.
- The Nigerian Securities and Exchange Commission (SEC) is working towards formalizing the crypto space through licensing under the Investment and Securities Act 2025 (ISA 2025), treating cryptocurrencies as securities.
- In August 2024, the SEC started granting provisional crypto licenses to crypto firms, indicating a move towards bringing crypto activity under regulatory oversight, which is a significant step in the general-news realm.
- The Central Bank of Nigeria (CBN) has imposed restrictions on banks facilitating crypto transactions, affecting fiat-crypto onramps like naira deposits and withdrawals, but Nigerians are circumventing these restrictions through P2P platforms and various means, including VPNs.
- The CBN's banking restrictions have extended to major exchanges like Binance, leading to operational restrictions such as the suspension of naira trading on P2P platforms and blocked access.
- The politics surrounding cryptocurrency in Nigeria are complex, with fintech startups directed to block accounts of customers engaging in crypto transactions while the government focuses on stabilizing the economy and integrating digital assets into the formal economy.
