Cryptocurrency's Legality in Nigeria is Conditional

The crypto sector in Nigeria continues to operate in a state of limbo, with the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) yet to speak with one voice. This lack of clear regulatory guidance has led to a situation where the practical implementation of cryptocurrencies depends on various factors, such as the bank used.

Arrests and interrogations of individuals involved in cryptocurrency transactions persist, highlighting the need for a more defined legal status for crypto in Nigeria. The legal status, however, remains yes, but the practicalities are far from straightforward.

The CBN and SEC must issue clear regulatory guidelines to define the legal status of cryptocurrencies, delineate their respective supervisory roles, establish licensing and compliance requirements for crypto entities, and coordinate enforcement mechanisms to eliminate overlapping jurisdiction. Such action would help restore confidence in the crypto sector.

In contrast, South Africa provides a clearer regulatory environment compared to Nigeria. The Financial Sector Conduct Authority (FSCA) designated crypto assets as financial products in 2022. This designation allows the SEC to classify cryptocurrencies as securities, giving it enforcement powers and investor protection mandates. By 2024, over 248 companies were licensed to operate within South Africa's regulatory framework for crypto assets.

However, in Nigeria, the regulatory overlap between the SEC and CBN has created a gap between de jure (what the law allows) and de facto (what happens in practice). This gap has resulted in many institutions acting defensively, with Nigerian banks continuing to freeze accounts linked to cryptocurrency activity.

In an attempt to clarify the situation, the CBN lifted the restriction on crypto transactions in late 2023. However, with little public guidance, banks remain uncertain about how to proceed. This uncertainty has left the crypto sector in Nigeria in a state of limbo.

To address this issue, advocacy groups and tech leaders in Nigeria should engage in regular dialogue with regulators, as seen in Kenya, to foster more nuanced, responsive policies. Clearer communication from authorities about the new legal landscape is necessary to avoid confusion and danger.

A joint circular or regulatory framework from the CBN and SEC would be beneficial in clarifying the crypto policy. Such a framework would provide much-needed clarity and certainty for the crypto sector in Nigeria, ensuring that it can operate effectively and safely. Consistent enforcement of crypto policies is necessary to eliminate the threat of arrest or asset seizure.

Until this happens, the crypto sector in Nigeria will remain in a state of uncertainty, with many institutions unsure of how to proceed. It is hoped that the CBN and SEC will work together to issue clear guidelines and provide the certainty that the sector needs to thrive.