Central Bank of Nigeria Crypto Policy Evolution: From Ban to Regulation

For years, Nigeria’s crypto scene operated in the shadows. Banks refused to touch it. Exchanges got shut down. Traders scrambled to move money through peer-to-peer deals just to buy Bitcoin. But by 2025, everything changed. The Central Bank of Nigeria didn’t just soften its stance-it rewrote the rules. This isn’t just a policy tweak. It’s the end of a five-year crackdown and the start of a new era where digital assets are legal, licensed, and monitored-not banned.

The 2017 Warning That Started It All

On January 12, 2017, the Central Bank of Nigeria (CBN) dropped its first real signal about cryptocurrency. Not a ban. Not a crackdown. Just a warning. In a circular to all banks and financial institutions, the CBN told them: don’t touch crypto. No accounts. No transactions. No processing payments for exchanges. The message was clear: we don’t recognize this, and we won’t enable it.

But here’s the key detail most people missed: the CBN didn’t outlaw crypto for Nigerians. It outlawed banks from dealing with it. That’s a huge difference. People could still buy Bitcoin. They just had to do it without banks. That loophole became the lifeline for Nigeria’s crypto market.

The 2021 Crackdown: When Banks Got Orders to Shut Accounts

Fast forward to February 5, 2021. The CBN doubled down. It sent a letter to every deposit money bank, microfinance bank, and payment service provider. The tone was harsh: “Identify and close accounts of persons and entities involved in cryptocurrency transactions.” This wasn’t a suggestion. It was a mandate. Banks had to purge crypto-related accounts. Exchanges lost access to the financial system. Withdrawals froze. Deposits got blocked.

The result? Nigeria’s crypto market didn’t die-it went underground. Peer-to-peer (P2P) trading exploded. Platforms like Paxful and LocalBitcoins became the new banks. Nigerians used mobile money, cash deposits, and even WhatsApp to trade Bitcoin for naira. The market kept growing, even as the government tried to choke it off. By 2022, Nigeria was the second-largest crypto market in Africa, behind only South Africa, despite the ban.

The Protest Effect: How Crypto Became a Tool of Resistance

In October 2020, protests erupted across Nigeria over police brutality. The #EndSARS movement gained global attention. And then something unexpected happened: donors from around the world started sending crypto to Nigerian activists. Why? Because the government froze bank accounts linked to the protests. Crypto was the only way money could still flow.

The CBN couldn’t stop it. No bank account meant no control. No central ledger meant no tracking. The government realized it was fighting a decentralized force with centralized tools. That moment changed everything. It wasn’t just about money anymore-it was about power. And crypto had shown it could bypass the state’s financial grip.

The SEC Steps In: A Parallel Track of Regulation

While the CBN was trying to shut crypto down, another agency was quietly building a path for it. The Securities and Exchange Commission (SEC) didn’t see crypto as a threat-it saw it as an asset class. On September 14, 2020, the SEC issued a statement: digital assets that function like investments-like tokens sold to raise funds-are securities. That meant they fell under SEC jurisdiction, not the CBN’s.

This created a strange split. The CBN said: “No banking for crypto.” The SEC said: “We’ll regulate crypto as securities.” For three years, these two agencies talked past each other. But by 2023, they had no choice but to work together. The rise of crypto businesses, the pressure from traders, and the global push for AML compliance forced a merger of approaches.

The Turning Point: VASP Guidelines and the 2025 Law

In December 2023, the CBN dropped its biggest bombshell: the Virtual Asset Service Provider (VASP) Guidelines. For the first time, banks were allowed to open accounts for crypto firms-if those firms had a license from the SEC. It was a full U-turn. The same banks that once closed crypto accounts were now being told to serve them.

This wasn’t random. It came right after the Nigerian National Assembly passed the Investments and Securities Act 2025. For the first time in Nigerian law, digital assets were formally recognized as securities. That gave the SEC clear authority. The CBN, now working in sync, focused on banking access and anti-money laundering controls.

The rules were strict: every crypto exchange, wallet provider, or trading platform had to register with the SEC, verify users (KYC), report suspicious activity (AML), and keep records. But for the first time, they could operate legally. No more hiding. No more fear of bank account closures.

The Fallout: When Global Exchanges Left

Not everyone welcomed the change. Some big players left during the ban. OKX, a major global exchange, pulled out in July 2024. In an email to Nigerian users, they said they were discontinuing services due to “recent changes in local laws.” But the timing was off. The VASP guidelines had just been released. OKX wasn’t reacting to new rules-it was reacting to the chaos of the ban.

Binance, the world’s largest crypto exchange, removed the naira from its platform in early 2024. Rumors swirled that two of its executives were detained over untraceable funds. The government used those incidents to justify its old stance: “See? Crypto is risky. It’s a money laundering tool.”

But here’s the truth: those incidents happened during the ban. The new system was designed to prevent them. Under the VASP rules, every transaction is traceable. Every user is verified. Every platform is accountable. The same risks still exist-but now, they’re manageable.

Why This Matters for Nigeria’s Economy

Nigeria’s crypto market is huge. Over 30% of Nigerian adults have owned or traded crypto. Remittances through crypto hit $1.5 billion in 2023-more than most formal channels. The government knew it couldn’t stop it. So it chose to control it.

The new system helps Nigeria in two big ways. First, it brings crypto transactions into the light. That makes it easier to tax, track, and regulate. Second, it helps Nigeria get off the Financial Action Task Force’s (FATF) Gray List. The FATF flagged Nigeria in 2022 for weak anti-money laundering controls. With VASP compliance, Nigeria now has a real framework to prove it’s serious.

What It Means for Nigerian Traders Today

Today, if you’re a crypto trader in Nigeria, you’re not hiding anymore. You can open a bank account with a licensed exchange. You can deposit naira directly. You can withdraw to your personal account without fear of it being frozen. You still need to verify your identity. You still need to report large trades. But you’re no longer operating in the gray zone.

The biggest change? Trust. Traders no longer worry about their bank shutting them down. Exchanges no longer fear sudden raids. Investors have a legal pathway. The market is growing again. In 2025, Nigeria’s crypto volume is projected to hit $4 billion-up 60% from 2023.

The Bigger Picture: A Global Lesson

Nigeria didn’t win by banning crypto. It won by realizing bans don’t work. The world saw how crypto thrived under repression-from Iran to Argentina to Nigeria. The lesson? You can’t outlaw technology. You can only regulate it.

Nigeria’s shift from prohibition to regulation is now a case study for other African countries. Ghana, Kenya, and South Africa are watching closely. If Nigeria’s system works, they’ll copy it. If it fails, they’ll keep banning.

The Central Bank of Nigeria didn’t give in to crypto. It adapted to reality. And in doing so, it turned a crisis into a chance to lead.