The Urgent Need for Crypto Regulation in Nigeria to Prevent Systemic Fraud

The cryptocurrency market in Nigeria has experienced explosive growth, but this expansion has come at a steep cost. In 2025 alone, the Nigerian Securities and Exchange Commission (SEC) reported over $218 million in losses from Ponzi schemes, with fraudulent operators exploiting investor naivety and regulatory gaps to promise unrealistic returns of up to 30% monthly, the governor confirmed. As Nigeria's digital economy matures, the absence of a robust regulatory framework is no longer a luxury-it is a liability. The urgency for comprehensive crypto regulation is not just about curbing fraud but about safeguarding Nigeria's financial stability and fostering trust in its digital future.

Nigeria's Regulatory Efforts: A Work in Progress

The Central Bank of Nigeria (CBN) has taken initial steps to address the crisis. A government-led working group, involving the CBN, the Ministry of Finance, and other agencies, is actively examining stablecoin adoption to balance innovation with risk management. This collaboration with the SEC aims to create a sustainable framework for digital assets, including taxation on eligible crypto transactions, the governor confirmed. However, these efforts remain fragmented and reactive. For instance, while the CBN has emphasized macroeconomic stability, the SEC has focused narrowly on investor protection, leaving critical gaps in oversight for cross-border transactions and decentralized platforms.

The global context underscores the stakes. The Financial Stability Board (FSB) has already established the FSB principle of "same activity, same risk, same regulation" for crypto assets, emphasizing the need for consistent oversight to prevent systemic risks. Nigeria's current approach, by contrast, lacks the coherence to address the full spectrum of crypto-related threats, from money laundering to market manipulation.

The Cost of Inaction: A Case Study in Fraud

The Nigerian SEC's data paints a grim picture. Fraudulent schemes thrive on platforms like WhatsApp, where aggressive marketing preys on unsuspecting investors. These operations not only erode public trust but also destabilize the broader financial system. For example, a single Ponzi scheme can trigger a cascade of defaults, particularly in a market where retail investors constitute a significant portion of participants.

This mirrors challenges faced by other emerging markets. In India, conflicting regulations-such as the 2018 banking ban and its 2020 reversal-caused trading volumes to plummet by 90% in 2018 before recovering post-2020, according to the study. Nigeria's current regulatory uncertainty risks a similar outcome, deterring institutional investment and stifling innovation.

Global Lessons: Regulation as a Catalyst for Growth

International case studies demonstrate that clear regulatory frameworks can mitigate risks while fostering growth. The European Union's Markets in Crypto-Assets Regulation (MiCAR), for instance, introduced harmonized rules for stablecoins and e-money tokens, enhancing investor protection and market integrity (MiCAR). Similarly, Brazil's 2022 recognition of crypto assets led to a 150% surge in trading volumes, while South Africa's draft regulations boosted market participation by 70%, the same study finds. These examples highlight a direct correlation between regulatory clarity and market confidence.

The U.S. provides another instructive model. Under the 2024 executive order, the SEC rescinded restrictive policies like SAB 121, enabling banks to offer digital asset custody services. This shift not only reduced barriers for institutional investors but also spurred innovation, as seen in the Token Safe Harbor Proposal 2.0. Nigeria's regulators could draw from these strategies to create a framework that balances innovation with safeguards.

The Path Forward: A Call for Regulatory Foresight

Nigeria's regulatory journey must prioritize three pillars: consumer protection, cross-agency collaboration, and international alignment. First, the SEC's push for verified platforms to operate in the crypto space is a step in the right direction, but it must be paired with stringent AML/CFT measures, as the SEC reports $218M in Ponzi losses demonstrates. Second, the CBN and SEC need to harmonize their efforts, ensuring that taxation and licensing policies cover both centralized and decentralized ecosystems. Finally, Nigeria should align with global standards like the FSB's framework to avoid becoming a jurisdiction of last resort for illicit actors.

The cost of delaying action is clear. Without regulation, Nigeria risks losing not only capital but also its position as a regional leader in fintech innovation. As the IMF has emphasized, a coordinated, consistent approach is essential to address the cross-border nature of crypto risks. For Nigeria, the time to act is now.