Nigeria, Africa’s largest crypto market south of the Sahara, is experiencing a dramatic shift in its cryptocurrency landscape. Recent regulatory actions and high-profile cases, such as the arrest of Binance’s Head of Financial Compliance, Tigran Gambaryan, underscore the complexities of navigating Nigeria’s crypto sector.

In February 2024, Gambaryan’s arrest, though not directly charged, symbolized the increasing scrutiny of cryptocurrency operations in Nigeria. The case has introduced tension between the U.S. and Nigerian governments, with Gambaryan’s deteriorating health in custody further complicating matters. Despite numerous interventions by U.S. diplomats and lawmakers, the legal and humanitarian aspects of his detainment continue to draw criticism.

The regulatory environment in Nigeria has become increasingly challenging for cryptocurrency firms. Notably, the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) have adopted conflicting approaches toward crypto regulation.

The CBN’s stance has been restrictive, including bans and directives to shut down accounts linked to cryptocurrency transactions. Conversely, the SEC’s regulations have been slow to take effect, creating a disjointed regulatory framework.

International crypto exchanges are feeling the impact of Nigeria’s stringent regulations. OKX, the second-largest crypto exchange globally, announced its exit from the Nigerian market due to regulatory uncertainty.

Similarly, KuCoin has imposed a significant value-added tax on Nigerian users, citing “changing local laws.” These actions reflect the broader trend of international exchanges reevaluating their operations in Nigeria.

Furthermore, the Nigerian government’s handling of cryptocurrency regulation has been marked by a series of reactive measures. The CBN’s February 2021 directive to halt Bitcoin transactions, followed by the introduction of the e-Naira, aimed to stabilize the currency and combat inflation.

However, these measures have yielded mixed results. While the e-Naira has struggled to gain traction, the rise of peer-to-peer (P2P) crypto markets has flourished, highlighting the gap between regulatory intentions and market realities.

The recent crackdown on fintech companies involved in cryptocurrency transactions has exacerbated the situation. Companies like Opay and Moniepoint have been instructed to block accounts associated with crypto activities. This move has forced many transactions to migrate to unregulated platforms, increasing risks and reducing oversight.

Despite these challenges, Nigeria’s commitment to blockchain technology remains evident. The National Blockchain Policy, launched in May 2023, aims to harness the potential of blockchain while setting the stage for future legal frameworks. However, the policy’s effectiveness remains to be seen, given the ongoing regulatory inconsistencies.