Regulatory friction and security breaches impede Nigerian Bitcoin adoption

The NIN transition and KYC costs

The regulatory transition to the National Identification Number and recurring security failures constitute the most significant risks in Bitcoin adoption among Nigerian fintech startups using Bitnob. The Central Bank of Nigeria (CBN) decision to remove the Bank Verification Number (BVN) as an identity document for Know Your Customer (KYC) purposes increases onboarding costs for fintech startups. The Federal government has been changing the unique means of identification of all agencies, parastatal and industries to National Identification Numbers (NIN). Examples include UTME/ JAMB registration, voter registration, Banks and SIM cards. The Nigerian Central Bank’s decision to suspend the use of the Bank Verification Number for verification purposes removes the ability of fintech and crypto startups to perform the necessary KYC procedures on their specific users. Chiagozie Iwu, CEO of a local crypto exchange, says the suspension of the BVN service removes the ability to do KYC on users. He notes that the CBN targets fintechs, including those like Flutterwave that handle volumes banks can only dream of. Nathaniel Luz, a cryptocurrency thought leader, describes the decision as a clash between "old and new money" that frustrates young people seeking economic independence. Before this change, the CBN accepted the BVN alongside other identity documents to check risk and determine if there was an element of money laundering, fraud, or corruption. Deputy Director of Banking Payments Systems Musa Itopa-Jimoh stated in 2017 that the Central bank cannot control or regulate bitcoin or blockchain.

Security breaches and market volatility

Security breaches and price fluctuations create significant risks for Nigerian cryptocurrency users. Patricia, a digital asset marketplace, lost $2 million in Bitcoin and naira assets after hackers breached its Patricia Personal retail trading program. The platform manages 30,000 daily transactions for 850,000 users. In 2022, the company dismissed employees after facing cash flow problems and received orders for team leads to cut staff by up to 80 percent. Volatility also impacts market stability, such as when Bitcoin fell from $11,600 to $10,500 following remarks from bankers. The Nigerian Central Bank calls Bitcoin investors "gamblers" and warns that they should not expect bank support. The Nigerian senate recently called upon the Central Bank of Nigeria and other regulators to issue public warnings about the dangers of investing in bitcoins. It also ordered its Senate Committee on Banking, Insurance and other Financial Institutions to investigate the viability of bitcoin as a form of investment and come up with recommendations to regulate and control its use. In January 2017, the CBN issued a public statement warning that virtual currencies are not legal tender and warned banks against holding, trading or transacting in virtual currencies pending a studied regulatory guideline.

Banking bans and the P2P shift

Banking restrictions force users to rely on peer-to-peer (P2P) trading methods. The CBN directive prohibits banks and financial institutions from processing payments for cryptocurrency exchanges or enabling payments for cryptocurrency exchanges. This ban prevents users on platforms like Binance, Luno, and Bundle from using local bank accounts to fund their accounts. Because of this, P2P trading volumes in Sub-Saharan Africa reach USD 18 million per week, with Nigeria accounting for 50 percent of these volumes. Informal trading via WhatsApp, Telegram, Instagram, and WeChat accounts for over half of the USD 200 million monthly volume in Nigeria. P2P trading works by having the exchange act as an escrow where a seller releases crypto after receiving payment from a buyer. The buyer receives the local bank account details of the seller from the platform. Bitnob provides a way to buy, sell, and save Bitcoin by allowing users to deposit funds from local bank accounts. The app allows users to download the app from the Google Play Store or Apple App Store and set up an account with an email address. Users fund the account via a local bank account, navigate to the ‘Buy Bitcoin’ section, and confirm the amount. You already know that these transaction steps are standard for most crypto apps. The app also has a savings plan where users set goals and automate transfers from a USD wallet. Bitnob’s bitcoin-powered international money transfer product, SendCash, is completely out for now. Does the shift to P2P trading eventually bypass the need for formal exchange regulations?

Regulatory oversight and adoption drivers

The Securities and Exchange Commission (SEC) uses the Accelerated Regulatory Incubation Programme (ARIP) to bring digital asset companies under formal oversight. Seven firms entered the programme: Bitbarter Technologies Limited, Luno Fintech Nigeria Limited, GetEquity Limited, Koinkoin Global Network Limited, Wrapped CBDC Ltd, Trovotech Ltd, and Blockvault Custodian Ltd. This follows the inclusion of Quidax and Busha in August 2024. The SEC evaluates these firms on asset custody practices and safeguards against fraud and market abuse. A 2026 study in the Journal of African Business using data from 417 participants across six geo-political zones shows that emotional perceived value and trust increase the intention to use cryptocurrencies. However, financial perceived value negatively impacts the intention to adopt cryptocurrencies. The Federal government also approved a National Blockchain Adoption Strategy on May 3, 2023, to increase the contribution of information and communications technology (ICT) to the country’s GDP. The strategy includes six initiatives: the establishment of a Nigerian Blockchain Consortium, a regulation and legal framework, a national digital identity framework, blockchain business incentives, blockchain digital literacy and awareness, and a national blockchain sandbox. The Nigerian Blockchain Consortium aims to drive initiatives and formulate plans to implement blockchain in the public sector, including supporting research, development, and education. Strategic objectives include providing regulatory oversight, stimulating innovation and entrepreneurship, ensuring security, increasing investment opportunities, and increasing efficiency in governance.