Crypto regulation in Nigeria, simplified for founders

If you're building a fintech or blockchain startup in Nigeria, you've probably heard conflicting advice about crypto regulation. One advisor says the SEC banned crypto. Another says the CBN is okay with stablecoins. A third mentions something about VASP registration. The truth is messier than any single statement: Nigeria's crypto rules are split across multiple regulators, each with overlapping (and sometimes contradictory) jurisdiction. There's no single "crypto license" in Nigeria yet. But there are clear guardrails, and founders who understand them move faster and avoid costly pivots.

This guide cuts through the noise. You'll learn which regulator controls what, what "VASP" actually means for your business, how stablecoins fit into the compliance picture, and the practical steps to take before you launch or scale. We've worked with dozens of founders navigating this landscape at LaunchPad, and the ones who succeed treat regulation as a feature, not a bug.

The regulatory landscape: who actually controls crypto in Nigeria

Nigeria doesn't have a single crypto regulator. Instead, you have three main players, each with real teeth.

The Securities and Exchange Commission (SEC) oversees digital assets that look like securities-tokenised equity, bonds, or investment contracts. In 2021, the SEC issued guidance clarifying that cryptocurrencies themselves (Bitcoin, Ethereum) are not securities, but many tokens and crypto products are. If you're building a token sale, an NFT platform with investment characteristics, or a crypto fund, the SEC is your primary regulator.

The Central Bank of Nigeria (CBN) controls money and payments. In February 2021, the CBN issued a circular restricting banks from facilitating cryptocurrency transactions. That circular is still in force, which is why most Nigerian exchanges can't use traditional banking rails. However, the CBN has been more permissive with stablecoins-particularly USDC and USDT-as part of its broader push toward digital payments. The CBN is also the gatekeeper for anything that looks like a payment system or remittance service.

The Federal Inland Revenue Service (FIRS) doesn't regulate crypto directly, but it taxes it. If you're earning, trading, or holding crypto, you owe tax on gains. This matters less for compliance with a regulator, but it matters enormously for your business structure and accounting.

A fourth player, the Financial Intelligence Unit (FIU), enforces anti-money laundering (AML) and know-your-customer (KYC) rules under the Money Laundering Prohibition Act. Any crypto business that touches naira or facilitates user transactions must comply with FIU standards.

The key insight: your regulatory burden depends on what you're building. A wallet that holds Bitcoin? Different rules than a stablecoin exchange. An NFT platform? Different again.

What is a VASP, and do you need to register as one

VASP stands for "Virtual Asset Service Provider." It's not a Nigerian term-it comes from the Financial Action Task Force (FATF), an international anti-money laundering body. But Nigeria is moving toward FATF compliance, and the term is creeping into local policy.

A VASP is any business that:

1. Exchanges virtual assets for fiat or other virtual assets
2. Transfers virtual assets on behalf of customers
3. Holds or safeguards virtual assets
4. Participates in or provides financial services related to virtual assets

In plain English: if you're a crypto exchange, a wallet provider, a custody service, or a staking platform, you're probably a VASP.

Nigeria doesn't yet have a formal VASP registry like some countries do. But the FIU has been signalling that VASP registration is coming. Several Nigerian exchanges-Luno, Binance P2P, and others-have already begun complying with VASP-like standards voluntarily, including robust KYC, transaction monitoring, and suspicious activity reporting.

For founders, the practical implication is this: if you're building anything that moves crypto or fiat, assume you'll need to register as a VASP within the next 12-24 months. Start building compliance infrastructure now. That means:

• Implement KYC at user onboarding (name, ID, proof of address, selfie)
• Monitor transactions for suspicious patterns
• Keep records for at least five years
• Report suspicious activity to the FIU
• Implement transaction limits and velocity checks

You don't need a special license to start, but you do need to be able to demonstrate compliance if the FIU asks.

Stablecoins: the regulatory sweet spot

Stablecoins are the one area where Nigerian regulators have been relatively clear and permissive. USDC and USDT dominate the market, and both are widely used for remittances, trading, and payments across Nigeria. Why? Because stablecoins reduce currency volatility-a huge problem for Nigerian businesses earning in dollars or dealing with forex risk.

The CBN hasn't explicitly approved stablecoins, but it hasn't banned them either. The SEC has signalled that stablecoins backed by real assets (like USD reserves) are not securities. The practical result: you can build on stablecoins with less regulatory friction than on other crypto assets.

If you're building a payments product, stablecoins are often your best bet. Many Nigerian fintechs-including some backed by major VCs-are using USDC and USDT as the settlement layer, with naira on-ramps and off-ramps handled through partners like Paystack, Flutterwave, or Moniepoint. This structure lets you avoid the CBN's banking restrictions while still serving Nigerian customers.

For a deeper dive on how stablecoins actually work in the African market, see our guide on Stablecoin payments in Africa: USDC, USDT, and what's actually used.

The CBN banking ban: what it means and how to work around it

The CBN's February 2021 circular told all banks to stop processing cryptocurrency transactions. It's still in effect. This means:

• You can't use a Nigerian bank account to directly buy or sell crypto
• You can't wire money from a Nigerian bank to a crypto exchange
• You can't receive crypto payments directly into a Nigerian bank account

This is a real constraint, but it's not a wall. Here's how founders work around it:

1. Use peer-to-peer (P2P) platforms. Binance P2P, LocalBitcoins, and other P2P services let Nigerians trade crypto directly without a bank. The CBN can't easily stop person-to-person transactions. This is how most retail Nigerians buy and sell Bitcoin today.

2. Use stablecoin on-ramps. Companies like Lemonade Finance, Busha, and others have built naira-to-USDC on-ramps that don't rely on traditional banking. They use payment processors, mobile money, or other rails. If you're building a product that needs naira liquidity, partner with one of these.

3. Use international payment processors. If your users are abroad or you're accepting international payments, you can use Paystack, Flutterwave, Stripe, or other processors that don't explicitly deal in crypto but can convert crypto to fiat on the backend.

4. Build on stablecoins natively. The cleanest approach: build your product entirely on stablecoins (USDC, USDT). Your users hold stablecoins, not naira. You settle with partners in stablecoins. You only convert to naira when you need to pay salaries or suppliers. This avoids the CBN's banking restrictions entirely.

The key is to structure your business so that the CBN's rules don't directly apply to your core transaction flow.

Tax obligations: what FIRS expects

The FIRS doesn't care much about your business model, but it cares a lot about your tax bill. Crypto gains are taxable in Nigeria. Here's what you need to know:

Capital gains tax: If you buy Bitcoin at 100 naira and sell at 150 naira, you owe tax on the 50 naira gain. The rate is 10% for most taxpayers.

Income tax: If you're earning crypto as salary or service income, it's taxable as ordinary income at your marginal rate (up to 24%).

Value-added tax (VAT): If you're providing crypto services (exchange, custody, etc.), VAT may apply to your fees. This is still being clarified, but assume 7.5% VAT on service fees.

Withholding tax: If you're paying contractors or service providers in crypto, you may owe withholding tax on the naira value.

For founders, the practical step is to:

1. Track all transactions in naira equivalent (use the CBN exchange rate on the transaction date)
2. Calculate gains and losses annually
3. File a tax return showing crypto income and gains
4. Work with a tax advisor familiar with crypto (not all Nigerian accountants are)

If you're earning in dollars and converting to naira, also see our guide on FX strategy for Nigerian startups earning in dollars.

AML/KYC compliance: the practical checklist

The FIU expects all crypto businesses to implement anti-money laundering controls. This isn't optional. Here's what you need:

Customer identification: Collect and verify:

• Full legal name
• Date of birth
• Residential address
• Government-issued ID (National ID, driver's license, or passport)
• Selfie for liveness verification

Beneficial ownership: If your customer is a business, identify the real owners (20% or more shareholders).

Transaction monitoring: Flag and investigate:

• Transactions above N5 million (or equivalent)
• Unusual patterns (rapid deposits and withdrawals, round-tripping)
• Transactions with high-risk jurisdictions
• Structuring (multiple small transactions to avoid reporting thresholds)

Suspicious activity reporting: If you detect suspicious activity, file a Suspicious Activity Report (SAR) with the FIU. You have 10 days.

Record retention: Keep all KYC documents and transaction records for at least five years.

Most modern fintech platforms (Paystack, Flutterwave, Kuda) already have these systems in place. If you're building on top of them, you inherit much of their compliance infrastructure. If you're building independently, use a KYC provider like Smile ID or Prembly to automate verification.

Practical steps to launch compliant

If you're building a crypto product in Nigeria right now, here's your roadmap:

1. Define your product clearly. Are you a wallet, exchange, lending platform, or something else? Different products have different regulatory homes.

2. Engage a local legal advisor early. Find a lawyer who understands both Nigerian law and crypto. This costs money upfront but saves far more later. Firms like Aluko & Oyebode, Banwo & Ighodalo, and others have crypto practices.

3. Implement KYC and AML from day one. Don't launch without it. Use a KYC provider if you can't build it yourself.

4. If you're dealing with fiat, build on stablecoins where possible. USDC and USDT are your friends. They let you avoid the CBN's banking restrictions while still serving Nigerian customers.

5. Document your compliance program. Write down your policies for KYC, transaction monitoring, suspicious activity reporting, and record retention. This shows regulators you're serious.

6. Monitor regulatory changes. The CBN and SEC are still evolving their crypto stance. Subscribe to regulatory updates from the CBN and SEC websites.

7. Join industry bodies. The Association of Cryptocurrency and Digital Assets Practitioners (ACDAP) and other industry groups share regulatory intelligence and advocate for clearer rules.

8. Plan for VASP registration. Even though it's not mandatory yet, assume you'll need to register within 12-24 months. Start building the infrastructure now.

How open banking connects to crypto compliance

Nigeria's open banking framework, mandated by the CBN, creates new opportunities for crypto integration. Banks are required to share customer data (with consent) via APIs, which lets fintechs build on top of banking rails. Some crypto platforms are exploring how to use open banking to create naira on-ramps without violating the CBN's crypto circular.

This is still evolving, but it's worth watching. For a full breakdown of who's actually compliant with open banking rules in 2026, see Open banking in Nigeria in 2026: who's actually compliant.

The future: what's likely to change

Nigeria's crypto regulation is still being written. Here's what we're watching:

VASP registration: The FIU is almost certainly going to formalize VASP registration within the next 12 months. Get ahead of this.

Stablecoin rules: The CBN may issue explicit guidance on stablecoins, possibly requiring reserves to be held in Nigeria or requiring a local issuer. This could make stablecoins even more attractive or more restricted-unclear yet.

Crypto tax clarity: The FIRS will likely issue clearer guidance on crypto taxation. Expect this to be more prescriptive, not less.

Central Bank Digital Currency (CBDC): The CBN has already launched the eNaira, its CBDC. As adoption grows, the CBN's stance on private crypto may shift. Watch this space.

International alignment: Nigeria is moving toward FATF compliance. Expect Nigerian rules to converge with global standards over time.

The bottom line: if you're building a crypto business in Nigeria in 2026, you're not operating in a regulatory vacuum. But you're also not operating under a crushing regime. The rules are clear enough to plan around, and the regulators are engaged enough that they'll likely give you a chance to comply if you show good faith.

FAQ

Q: Can I launch a crypto exchange in Nigeria right now? A: Technically yes, but you'll need robust AML/KYC systems and you should engage a legal advisor. You can't use traditional banking, so you'll need alternative on-ramps (P2P, stablecoins, payment processors). Expect regulatory scrutiny as you grow.

Q: Is Bitcoin legal in Nigeria? A: Bitcoin itself is not illegal. The CBN banned banks from processing crypto transactions, but it didn't ban citizens from owning or trading crypto. You can hold Bitcoin; you just can't easily buy or sell it through a bank.

Q: Do I need to register as a VASP? A: Not yet-there's no formal VASP registry in Nigeria. But the FIU is moving toward requiring it. If you're building any crypto business, assume you'll need to register within 12-24 months and start building compliance infrastructure now.

Q: What's the difference between SEC and CBN oversight for crypto? A: The SEC regulates crypto products that look like investments (token sales, crypto funds). The CBN regulates crypto as a payment or settlement asset. If you're building a token sale, you likely need SEC approval. If you're building a payment platform, you need CBN compliance (or you work around it using stablecoins).

Q: Can I use Paystack or Flutterwave to accept crypto payments? A: Not directly-they don't accept crypto as input. But you can use them to convert crypto to fiat on the backend, or you can use stablecoin on-ramps like Busha or Lemonade Finance to convert naira to USDC. Many crypto platforms use a combination of these partners.

What to do next

Start by clarifying your product and regulatory home. Is it an exchange, wallet, lending platform, or something else? Then engage a local legal advisor-don't skip this step. Finally, implement KYC and AML infrastructure from day one, and plan your on-ramp strategy around stablecoins or alternative payment rails.

For a deeper dive on how stablecoins actually work in Nigeria and Africa, read Stablecoin payments in Africa: USDC, USDT, and what's actually used. If you're building a fintech that touches banking, also review Open banking in Nigeria in 2026: who's actually compliant to understand how to integrate with regulated banks safely.