By Chinwendu Obienyi
Nigeria’s financial system is quietly entering one of its most critical phases in recent history. On the surface, the Central Bank of Nigeria (CBN) appears to be running a routine compliance exercise. But beneath that calm exterior lies a strategic push to fortify the country’s financial defences, rebuild global confidence and prevent a return to the kind of regulatory scrutiny that has shadowed emerging economies in recent years.
This effort is a carefully designed pilot supervision programme targeting a select group of Virtual Asset Service Providers (VASPs). These include firms such as Flutterwave, Paystack, and global crypto exchange KuCoin. While these names have attracted public attention, the CBN has been clear that the exercise is not about licensing, approval or endorsement. Instead, it is a controlled supervisory engagement aimed at gathering intelligence, understanding risk, and strengthening regulatory readiness.
Participation in the pilot does not confer any regulatory status. Rather, it offers regulators a structured window into how digital asset firms operate, how transactions are processed, how customers are onboarded, and how financial flows move across borders within decentralised systems.
This is particularly important in a world where virtual assets are no longer a niche concept. From cryptocurrencies to tokenised real-world assets, the digital finance ecosystem is expanding rapidly and becoming deeply embedded in global financial systems. Yet, despite this growth, it remains one of the most difficult sectors to regulate due to its borderless and decentralised nature.
According to blockchain experts, the CBN’s move is less about enforcement and more about preparation.
They note that Nigeria is approaching a crucial review of its financial system under international anti-money laundering standards. That review, known as a mutual evaluation, will assess how effectively the country implements global guidelines set by the Financial Action Task Force (FATF).
“Leaving increased monitoring is not the end. It is more like a probation period. You must sustain improvements or risk slipping back,” he added.
Grey list: Why compliance matters more than ever
Nigeria has faced sustained pressure in recent years over concerns about weak controls on illicit financial flows. One of the most serious consequences of such concerns is placement on the FATF grey list, officially known as enhanced monitoring.
Being placed on that list can have far-reaching economic implications. It can deter foreign investment, slow down international transactions, increase compliance costs for financial institutions, and subject Nigerian businesses to heightened scrutiny in global markets.
Avoiding a return to that list is now a top policy priority.
To achieve this, blockchain czars emphasised the need for coordination among three critical institutions; the CBN, the Securities and Exchange Commission (SEC), and the Nigerian Financial Intelligence Unit (NFIU).
“Together, they are responsible for ensuring that financial flows, especially in emerging sectors like crypto, are transparent and traceable,” an expert asserted.
The pilot supervision programme is part of that broader alignment. By engaging directly with VASPs, the CBN is working to close a key knowledge gap. Traditional banking systems were built for centralised financial structures, not blockchain-based ecosystems where transactions can occur instantly across multiple jurisdictions with minimal intermediaries.
Inside the pilot
The CBN’s pilot programme is structured around detailed compliance and reporting requirements. Participating VASPs must submit monthly supervisory data, including key performance indicators linked to anti-money laundering, counter-terrorism financing, and counter-proliferation financing frameworks.
Beyond reporting, firms are subject to rigorous supervisory reviews. These cover governance structures, customer onboarding processes, sanctions screening mechanisms, and transaction monitoring systems.
A central focus of the exercise is compliance with the FATF Travel Rule, a global standard requiring financial institutions to share information about senders and recipients of transactions above a specified threshold. While this rule is well established in traditional banking, its adoption within the crypto ecosystem is still evolving.
For virtual asset providers, this represents a major operational shift.
“This is a two-way process. The regulators are learning about the industry, and the companies are learning what will be expected of them,” a blockchain expert Obinna Iwuno, stated.
The pilot also requires participating firms to demonstrate credible implementation plans for these global standards, particularly in areas related to cross-border activity and proliferation financing controls.
Not a conflict but a coordinated approach
One recurring question has been whether the CBN’s pilot overlaps with regulatory efforts already underway at the Securities and Exchange Commission Nigeria.
However, experts insist that the two institutions are not in conflict. Instead, they serve complementary roles within the broader regulatory architecture.
The SEC focuses on investor protection and market development, particularly through its sandbox programmes for digital assets. The CBN, on the other hand, is primarily concerned with financial system stability, payment infrastructure, and risk management.
The pilot therefore does not replace or override existing frameworks. Instead, it reinforces a growing shift toward coordinated regulation, where multiple agencies work together to oversee different aspects of the same financial ecosystem.
Why only a few?
The limited number of firms selected for the pilot has sparked curiosity, especially given Nigeria’s position as one of the most active crypto markets in the world.
But the CBN has clarified that the programme is being rolled out in phases. The current participants represent the first stage of a broader, structured engagement process. Future phases are already planned.
The initial list includes entities such as Juicyway, KoinKoin, and the Nigerian digital currency initiative cNGN, alongside global and domestic fintech players.
Iwuno argues that the selective approach is intentional and appropriate for the nature of the exercise.
“Because the exercise is exploratory rather than regulatory, there is less need for broad participation. The goal is to generate insights, not to grant market access or approvals. If this were licensing, the selection process would be a major issue. But this is internal work, about building understanding,” he noted.
Restriction to engagement
The pilot also reflects a broader evolution in the CBN’s approach to digital assets.
In earlier years, the regulator maintained a more restrictive stance, particularly regarding banking relationships with crypto-related businesses. However, the current approach suggests a transition toward engagement, structured supervision, and risk-based oversight.
This shift mirrors global trends, where regulators are increasingly moving away from outright restrictions toward frameworks that allow innovation while managing risks.
The implication is that digital finance is no longer something to be pushed aside. It must be understood, integrated, and regulated.
The growing prominence of digital assets underscores a fundamental shift in the global financial landscape.
From stablecoins facilitating cross-border payments to tokenised assets representing real estate, commodities, and even intellectual property, the ecosystem is expanding at an unprecedented pace.
For Nigeria, one of the world’s most active crypto markets, this presents both an opportunity and a challenge.
“For Nigeria, the stakes are even higher. The country must balance innovation with oversight, supporting fintech growth while ensuring financial integrity,” Iwuno advised.
Ignoring this shift is no longer an option. The question now is how effectively Nigeria can adapt.
Leave a comment