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

Back in 2021, if you were caught trading Bitcoin in Nigeria using a bank account, your account could be frozen overnight. No warning. No appeal. Just gone. That was the reality under the Central Bank of Nigeria’s (CBN) strict ban on cryptocurrency transactions. But by 2025, the same bank that once shut down crypto accounts now licenses crypto firms and lets banks work with them. This isn’t just a policy tweak-it’s a full reversal. And it tells you everything about how governments are learning to deal with decentralized money.

The 2017 Warning: Not a Ban, But a Red Flag

The CBN first spoke up about cryptocurrency in January 2017 with a circular to all banks. It didn’t say crypto was illegal. It didn’t say you couldn’t own it. But it told banks: don’t touch it. No accounts for crypto exchanges. No transfers for Bitcoin purchases. No processing payments for digital asset platforms. The goal? To stop money laundering and protect the banking system from unregulated risks.

At the time, Nigeria’s crypto scene was tiny. A few early adopters, mostly tech-savvy students and freelancers sending remittances. But the CBN’s move sent a chill through the industry. Banks started closing accounts of people who traded crypto-even if they weren’t running exchanges. People didn’t stop trading. They just moved underground.

The 2021 Crackdown: The Real Ban

On February 5, 2021, the CBN went further. It issued a letter to all deposit money banks, microfinance institutions, and financial intermediaries. It was clear: no dealing in crypto. No facilitating payments. No holding accounts for crypto businesses. This wasn’t a suggestion. It was an order. And it had teeth.

Banks started shutting down thousands of accounts linked to crypto trading. Companies like Binance and OKX saw their Nigerian customers suddenly cut off. But here’s the twist: people didn’t stop trading. They just switched to peer-to-peer (P2P) platforms. Instead of using banks, Nigerians bought Bitcoin directly from other people using mobile money apps, cash deposits, and even WhatsApp. P2P trading exploded. Nigeria became one of the top countries in the world for P2P crypto volume.

Why? Because when the government blocks the highway, people build dirt roads. And in Nigeria, those dirt roads ran through WhatsApp groups and local marketplaces. Crypto became a lifeline during the #EndSARS protests in 2020. When the government froze activist bank accounts, crypto donations kept the movement alive. That’s when the CBN realized: you can’t stop what people can’t see.

The SEC Steps In: A Parallel Path

While the CBN was shutting doors, the Securities and Exchange Commission (SEC) was opening windows. In September 2020, the SEC declared that any digital asset that acted like a security-like a token promising returns or profit-sharing-would be regulated under the Investments and Securities Act. This was huge. It meant crypto wasn’t just gambling or tech hype. Some tokens were financial instruments.

The SEC and CBN formed a joint committee to figure out how to handle crypto. The CBN wanted control over banks. The SEC wanted to regulate investment products. Neither wanted chaos. But neither had a clear plan-until 2023.

The 2023 Pivot: Licensing, Not Banning

In December 2023, everything changed. The CBN dropped the Virtual Asset Service Provider (VASP) Guidelines. For the first time, it said: banks can open accounts for crypto firms-if they’re licensed by the SEC.

This was the official end of the ban. Not because crypto was safe. Not because the CBN suddenly loved Bitcoin. But because the ban had failed. People were still trading. Money was still moving. And the government was losing control-not because of hackers, but because of its own inflexibility.

The new rules were strict. Crypto companies had to register with the SEC. They had to do full KYC (know your customer). They had to report all transactions. They had to prove they weren’t laundering money. The SEC became the gatekeeper. The CBN became the enabler.

The 2025 Law: Crypto as a Security

By 2025, Nigeria passed the Investments and Securities Act 2025. This law formally recognized digital assets as securities. It gave the SEC full authority to license, audit, and penalize crypto firms. It also made it illegal to operate a crypto exchange without a license.

This wasn’t just about regulation. It was about legitimacy. Nigeria was trying to get off the Financial Action Task Force’s (FATF) Gray List. The FATF had flagged Nigeria for weak anti-money laundering controls. Crypto was a big reason why. By bringing crypto into the formal system, Nigeria showed it could manage risk-even with decentralized tech.

What Happened to the Big Exchanges?

During the ban, some big players left. OKX pulled out in July 2024, telling customers to withdraw funds because of "recent changes in local laws." Binance removed the naira from its trading pairs. Rumors swirled that two Binance executives were detained over untraceable funds.

But here’s the irony: those same companies are now back. Not as outsiders. Not as rule-breakers. As licensed VASPs. They’re applying for SEC licenses. They’re setting up local offices. They’re hiring Nigerian compliance officers. The market didn’t die-it adapted.

Why the Change? The Real Reason

The CBN didn’t change its mind because it believed in crypto. It changed because it had no choice.

Nigeria’s youth are among the most crypto-literate in the world. Over 30% of adults have traded or owned crypto. The country’s remittance market is worth over $20 billion a year. Much of it flows through crypto because traditional channels are slow and expensive.

The government also realized it was losing tax revenue. When crypto trades happen off the books, no one pays tax. When they’re licensed and tracked, they can be taxed.

And then there’s the dollar. Nigeria’s currency has been under pressure. The government blamed crypto traders for driving up demand for dollars. But the truth? The real problem was oil prices and poor fiscal policy. Crypto was just the scapegoat.

Current Rules: What You Need to Know in 2025

If you want to trade crypto in Nigeria today, here’s what matters:

• You can’t trade through an unlicensed exchange. The SEC has published a list of approved VASPs.
• Your bank can now legally hold your crypto business account-if the firm is licensed.
• You must complete KYC. No anonymous trading.
• All transactions over 500,000 naira must be reported to the Financial Intelligence Unit.
• Stablecoins like USDT are allowed-but only if issued by licensed entities.

The system isn’t perfect. There are still delays in licensing. Some banks are still nervous. But the framework is there. And it works.

What’s Next for Nigeria’s Crypto Market?

Nigeria is now a model for other African countries. Ghana, Kenya, and South Africa are watching closely. If Nigeria can regulate crypto without crushing innovation, others will follow.

The next big step? A national digital currency. The CBN has been testing the eNaira since 2021. But adoption has been slow. Why? Because people don’t trust it. They trust Bitcoin more than their own central bank’s digital money.

That’s the real lesson here. You can’t force people to use your currency. But you can let them use better ones-if you control the rules.

Nigeria didn’t win the crypto war. It stopped fighting it. And that made all the difference.