By MUSBAU RAZAK

Nigeria stands at a crossroads in its approach to cryptocurrency. As one of the world’s largest markets for digital assets, the country has witnessed a surge in crypto adoption due to economic instability, inflation and financial exclusion. However, this growth has come with significant risks, particularly with the unregulated peer-to-peer, P2P, trading system that now dominates Nigeria’s crypto landscape.

While cryptocurrency presents opportunities for financial inclusion, wealth creation, and economic innovation, these benefits can only be fully realised under a well-regulated system. Allowing P2P crypto trading to thrive unchecked poses severe financial, security, and economic risks that outweigh its supposed advantages. A regulated cryptocurrency framework will bring stability, security, and legitimacy to Nigeria’s digital economy.

The appeal of cryptocurrency in Nigeria

The adoption of cryptocurrency in Nigeria has been driven by multiple factors, including a weakened naira, limited access to foreign exchange, high remittance fees, and a growing digital-savvy population. The Central Bank of Nigeria, CBN, and other financial regulators initially resisted the integration of crypto into the economy, fearing its potential for illicit activities such as money laundering, fraud, and tax evasion. However, despite regulatory crackdowns, Nigerians have found ways to continue transacting in cryptocurrency, primarily through decentralised P2P exchanges. This is inevitable. Crypto cannot be uninvented. The decision is not whether we want crypto, but what we want it to be – risk or opportunity?

While P2P platforms enable users to trade directly without intermediaries, this model has created an unregulated “wild west” environment where fraud, financial scams, and illegal transactions flourish. This undermines national economic stability and puts investors at substantial risk. The government must now take proactive steps to regulate crypto exchanges while eliminating P2P transactions, ensuring that cryptocurrency contributes positively to Nigeria’s economy rather than serving as a tool for financial instability.

The dangers of unregulated peer-to-peer exchanges:

1. Fraud and scams

One of the most significant problems with P2P crypto trading is the high incidence of fraud. P2P platforms rely on trust between buyers and sellers, yet cases of fraud are rampant. Criminals exploit the anonymity of P2P transactions to scam unsuspecting users. Fake payment confirmations, reversed transactions, and false claims are common tactics used by fraudsters to dupe traders.

With no regulatory oversight, victims of these scams have little to no recourse. Unlike traditional financial institutions, where transactions can be traced and fraudsters held accountable, P2P crypto transactions are often irreversible. A regulated system would introduce robust consumer protection mechanisms to mitigate these risks.

2. Facilitating money laundering and terrorism financing

P2P crypto trading provides an avenue for illicit financial activities, including money laundering and terrorism financing. NO Know Your Customer, KYC, and Anti-Money Laundering, AML, measures will apply. Criminals can easily use P2P exchanges to move illicit funds across borders, confident that they can stay in the shadows.  

This lack of oversight makes it difficult and costly for law enforcement agencies to track and intercept illegal transactions. A regulated cryptocurrency exchange, however, would impose strict KYC/AML requirements, ensuring that only verified users can transact, thereby reducing financial crime. This goes to the heart of what the state can do. Peer to Peer crypto is outside the control of any state. We cannot afford that.  

3. Economic and currency instability

The dominance of P2P crypto exchanges undermines Nigeria’s financial stability. Many Nigerians use cryptocurrency as a hedge against inflation and to bypass restrictions on foreign exchange. While this might benefit individual traders in the short term, it weakens the naira in the long run, exacerbating economic instability.

Unregulated crypto trading also contributes to capital flight, where wealth is stored in digital assets instead of being reinvested in Nigeria’s economy. By enforcing regulation and curbing P2P transactions, Nigeria can prevent further economic disruptions while promoting legitimate crypto use that benefits national development.

The case for a regulated crypto environment:

We are currently in limbo. There are regulations but they have not been implemented and so Nigerian crypto exchanges are banned. They want to work within the law, pay their taxes, and employ Nigerians.  

Nigeria should adopt a structured regulatory framework that allows digital assets to operate within the financial system safely and transparently. Countries such as the United States, the United Kingdom, and Singapore have successfully implemented regulations that allow cryptocurrencies to thrive while mitigating risks. 

Nigeria must follow suit by enacting policies that ensure responsible crypto usage.

1. Establishing a licensing system for crypto exchanges

To ensure transparency and accountability, Nigeria should introduce a licensing system for cryptocurrency exchanges, requiring them to register with the appropriate financial regulatory bodies such as the CBN and the Securities and Exchange Commission, SEC. Licensed exchanges should be mandated to implement strong KYC and AML policies, ensuring that all users are verified before trading.

By doing so, the government can curb illegal activities while protecting users from fraud. This approach will also encourage reputable global exchanges to operate in Nigeria, fostering a safer and more stable crypto ecosystem.

2. Implementing consumer protection measures

Regulation will help protect Nigerian crypto users by enforcing standardised trading practices. Licensed exchanges should provide customer support, fraud detection mechanisms, and insurance for digital assets, ensuring that users are not left vulnerable to losses. Additionally, a dispute resolution framework should be established to handle transaction disputes effectively, reducing fraud-related risks.

3. Taxation and Revenue Generation

One of the most overlooked benefits of a regulated crypto market is its potential for taxation and revenue generation. Currently, unregulated P2P transactions allow individuals to trade cryptocurrency without contributing to national revenue. If exchanges are regulated and required to comply with tax laws, the government can generate substantial revenue through transaction taxes, capital gains taxes, and service charges.

This revenue can then be reinvested into critical sectors such as infrastructure, healthcare, and education, ultimately benefiting the Nigerian people.

4. Enhancing Financial Inclusion and Innovation

A well-regulated crypto industry can drive financial inclusion by providing banking services to the unbanked population. Traditional financial systems often exclude many Nigerians, particularly those in rural areas. However, regulated crypto exchanges can bridge this gap by offering secure, digital financial solutions without the risks associated with P2P platforms.

Additionally, regulation will encourage blockchain innovation in Nigeria, leading to the development of fintech startups, job creation, and increased investment in the digital economy. This will position Nigeria as a leader in Africa’s emerging crypto market, attracting foreign direct investment (FDI) and boosting economic growth.

Conclusion: The Way Forward

The current state of cryptocurrency in Nigeria presents both opportunities and challenges. While crypto has the potential to revolutionize finance, its unregulated P2P trading model has resulted in widespread fraud, financial instability, and illicit activities. To harness the benefits of digital assets while minimizing risks, Nigeria must implement the comprehensive regulatory framework which the CBN and SEC have already design. That will reduce P2P transactions and promote licensed, transparent crypto exchanges.

By doing so, the country can protect investors, strengthen financial stability, generate tax revenue, and foster economic innovation. Regulation is not about stifling cryptocurrency but about ensuring that it operates in a manner that benefits all Nigerians. The government must act decisively to create a safe, sustainable, and legally compliant crypto industry that aligns with national economic goals.

Nigeria has a chance to set an example for the rest of Africa by showing how a country can embrace cryptocurrency responsibly. The future of digital finance in Nigeria depends on striking the right balance between innovation and regulation. It is time for policymakers, financial institutions, and crypto stakeholders to work together to build a regulated ecosystem that prioritizes security, transparency, and economic growth.

•Adisa Razak, a public affairs commentator, wrote from Lagos