The Anti-Money Laundering, Counter Financing of Terrorism and Counter Proliferation Financing (AML/CFT/CPF) Supervision Pilot for selected virtual asset service providers may not mean full regulation of the cryptocurrency market, but certainly marks a pivot from strict avoidance to controlled engagement, ISAAC CHIBUIFE reports.

When the Central Bank of Nigeria announced on March 30, 2026, the commencement of an Anti-Money Laundering, Counter Financing of Terrorism and Counter Proliferation Financing (AML/CFT/CPF) Supervision Pilot for selected virtual asset service providers (VASPs), it did not read like a dramatic policy reversal. The language was measured, technical and carefully qualified.

Yet for Nigeria’s cryptocurrency ecosystem, a market that has grown despite years of regulatory hostility, the announcement is a significant turning point.

The CBN’s move places six companies — cNGN, Flutterwave, Juicyway, KoinKoin, KuCoin, and Paystack — under formal supervisory engagement for the first time. They are required to submit monthly compliance reports, participate in regulatory reviews and demonstrate readiness for the FATF Travel Rule, an international standard that compels virtual asset platforms to share sender and recipient information on transactions.

The pilot, the CBN stressed, does not amount to licensing or regulatory approval. Yet, it is, without doubt, the most structured engagement the apex bank has had with the digital asset sector.

Shift from ban to engagement
Nigeria’s regulatory history with crypto has been one of oscillation. In January 2021, the CBN directed banks and financial institutions to close accounts linked to cryptocurrency transactions, citing financial stability and money laundering concerns. The directive did not kill crypto adoption. Instead, it pushed it underground, increased peer-to-peer (P2P) trading and kept billions of naira in digital asset transactions outside the formal banking system.

Five years later, the same central bank is sitting across the table from some of the country’s largest payment platforms and digital asset exchanges. The shift, though gradual, is notable.

A blockchain community developer, Nduka Annaelechukwu, describes the policy option as a movement “from strict avoidance to controlled engagement”. He argues that the 2021 directive only “limited exposure but did not stop adoption,” and that regulators have had little choice but to adjust.

“The pilot emphasises data collection, compliance, and risk monitoring. This is a practical adjustment rather than a full policy reversal,” he said.

The distinction matters. The CBN has been explicit that the pilot exists within its existing mandate and does not alter the broader regulatory framework governing virtual assets, which remains primarily within the remit of the Securities and Exchange Commission (SEC), following the Investment and Securities Act 2025 and the SEC’s Virtual Assets Service Providers Regulations issued in 2024.

Of course, the CBN’s focus is restricted to financial crime risk, cross-border flows, and the integrity of payment channels.

The significance of six
The composition of the initial cohort may be deliberate. cNGN is a Nigerian naira-backed stablecoin. Flutterwave and Paystack are dominant payment processors with significant diaspora and cross-border transaction volumes. KoinKoin and Juicyway are crypto-to-fiat platforms that facilitate remittances. KuCoin is a global exchange with a notable Nigerian user base.

Together, they represent, in Annaelechukwu’s framing, “the major highways and checkpoints” of the Nigerian crypto economy – places where digital assets are converted to local currencies, where diaspora transfers arrive and where large-volume trading occurs.

The CBN’s logic, analysts say, is straightforward: monitor the infrastructure that connects the crypto economy to the formal financial system to gain visibility into the risks that flow through it.

“This shows the CBN is focused on entry and exit points, high-volume platforms, and cross-border flows. These areas have major influence and can affect the wider economy,” Annaelechukwu said.

The inclusion of Flutterwave and Paystack is particularly telling. Both companies are primarily known as payment processors, not as crypto-native firms. Their inclusion suggests the CBN views crypto-adjacent activity such as stablecoin settlements and crypto-funded payment rails as falling within its supervisory scope, even where the companies t
hemselves do not define their core business as virtual assets.

The FATF playbook
Underlying the pilot is a concern that extends beyond Nigeria’s borders. The Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, placed Nigeria on its grey list in 2023, a designation that signals deficiencies in countries’ anti-financial crime frameworks and raises compliance costs for banks and businesses operating internationally.

Getting off that list requires demonstrable progress across a range of areas, including the supervision of virtual asset service providers. FATF Recommendation 15 requires countries to regulate and supervise VASPs, while Recommendation 16 — the Travel Rule, requires VASPs to transmit originator and beneficiary information alongside transactions above a certain threshold.

The CBN pilot is, in part, a response to these international obligations. Participating entities are specifically required to demonstrate “credible implementation plans for the FATF Travel Rule” and to undergo reviews covering sanctions screening, transaction monitoring and cross-border activity, precisely the areas FATF assessors examine.

For Nigeria, the stakes are high. Remaining on the FATF grey list increases correspondent banking costs, complicates trade finance and adds friction to remittance flows that the country partly depends on to stabilise the naira. The World Bank consistently ranks Nigeria among the top recipients of remittances. Any regulation that undermines the flow has direct economic consequences.

What does this mean for the market?
For participating companies, the pilot creates new obligations but also, implicitly, a form of legitimacy. Being invited into a formal supervisory engagement with the CBN — even one explicitly described as non-licensing signals to institutional counterparties and international partners that the entities are engaging with Nigeria’s regulatory architecture.

A crypto trader, Ogbuja Emmanuel, argues that structured oversight can improve investor confidence, noting, “Government oversight makes the crypto market look more legitimate and trustworthy. Institutional investors feel safer investing in regulated startups.”

He says, however, that overly rigid compliance requirements carry a countervailing risk — deterring investors who prefer more flexible operating environments.

The concern about market concentration is more immediate. The CBN has confirmed that subsequent phases of the pilot are “already fully scheduled” and are not open to external expressions of interest. This creates an asymmetrical market condition: companies inside the pilot gain regulatory familiarity and early insight into the CBN expectations, while those outside it do not.

Emmanuel is direct about the implications for smaller operators. “A compliance-heavy supervisory pilot can create high costs and strict regulatory requirements that smaller VASPs may struggle to meet. Smaller firms may face reduced innovation opportunities and slower growth while waiting for future regulatory approval,” he said.

Annaelechukwu makes a related point about the depth of representation. The current cohort, he notes, skews toward established platforms with significant transaction volumes.

“Including startups, local exchanges, developers and community-led initiatives will provide a more complete picture of how crypto is actually used on the ground,” he said.

Users’ concerns and transparency
For ordinary users of the platforms, the pilot raises a different set of questions. A crypto enthusiast, Alabi Sampson, with active trading and payment history on several of the listed platforms, gives voice to a concern likely shared by many. What triggers regulatory scrutiny and what happens when it does?

“At what point will I pay for a service and get flagged about money laundering?” he asked.

Is my privacy not being breached? The privacy of my clients: is it being breached by making use of these virtual asset service providers?”

The questions are not abstract. Nigerian banks have a record of flagging or freezing accounts based on transaction volume or frequency, sometimes without sufficient justification. Users who have experienced that with conventional banking are understandably anxious about whether similar dynamics will play out in the crypto sector, particularly given that the CBN’s supervisory template has not been made public.

The CBN’s press release states that all data submitted by participating VASPs “is treated as confidential supervisory information” and handled in accordance with the Nigeria Data Protection Act 2023. But the act governs how regulators protect information they collect; it does not resolve the prior question of what information is collected, under what criteria and with what consequences for individual users.

The ambiguity is not unusual in financial supervision. Central banks rarely publish their examination templates. But in a market where trust between regulators and users has historically been thin, the lack of public communication about thresholds and protocols risks compounding uncertainty.

Unresolved regulatory overlap
One tension the pilot does not fully resolve is the longstanding question of regulatory jurisdiction over virtual assets in Nigeria. The CBN, SEC and the Federal Competition and Consumer Protection Commission (FCCPC) have each asserted authority over different aspects of the sector at different times.

The CBN’s press release is careful to note that the pilot “does not alter, replace or supersede the existing regulatory framework governing virtual assets in Nigeria or the mandates of other competent authorities”. This is, perhaps, a tacit acknowledgement that jurisdiction remains contested.

Annaelechukwu is cautiously optimistic, saying: “Over time, clearer roles may emerge. The outcome depends on coordination. Without it, complexity increases. With it, the system becomes more structured.”

He believes that while the CBN is not acting in isolation, multi-agency coordination is already underway, even if not publicly announced. The risk, however, is that companies with shared CBN and SEC oversight face duplicated compliance burdens, conflicting requirements and regulatory gaps where neither authority claims clear responsibility.

The bigger picture
Nigeria’s crypto market is one of the most active in the world by retail volume. It has grown not because of regulatory support despite regulatory ambiguity, driven by demand for dollar liquidity, remittance alternatives and inflation hedges. The question before regulators now is whether formal supervision can be structured in a way that captures the risks without suppressing the market’s genuine utility.

The CBN’s pilot is for a start — a data-gathering exercise designed to build supervisory capacity and establish a baseline understanding of how the largest VASPs operate. Its value will depend on what the regulator does with what it learns and whether the frameworks are calibrated to Nigeria’s specific market conditions. For the ecosystem, the pilot signals that the age of regulatory avoidance is over.