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The Virtual Asset Service Providers Association (VASPA) has welcomed the Central Bank of Nigeria’s (CBN) move to strengthen oversight of the country’s virtual asset ecosystem, but has raised concerns about the structure, transparency, and inclusiveness of the ongoing supervisory pilot.
The CBN recently launched a targeted pilot programme involving selected Virtual Asset Service Providers (VASPs), as part of efforts to enhance regulatory visibility and address risks associated with money laundering, terrorism financing, and proliferation threats within the fast-evolving digital asset space.
Anchored on existing legal frameworks such as the Money Laundering (Prevention and Prohibition) Act 2022 and the Banks and Other Financial Institutions Act 2020, the initiative signals a more deliberate and structured approach to regulating virtual asset activities in Nigeria.
In a position statement, VASPA described the pilot as a positive step toward aligning Nigeria with global Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) standards, particularly those outlined by the Financial Action Task Force (FATF). However, it cautioned that certain elements of the programme could undermine industry trust if not addressed.
Concerns Over Selection Process
A key issue highlighted by the association is the perceived lack of transparency in the selection of participating firms. According to VASPA, there was no open application process, with participants reportedly handpicked by the regulator. The association noted that even future participation appears limited, raising concerns about fairness and equal opportunity.
VASPA contrasted this approach with global regulatory sandboxes operated by institutions such as the UK’s Financial Conduct Authority and the Monetary Authority of Singapore, which adopt open, criteria-based selection processes.
It warned that a closed selection model risks creating an uneven playing field and may limit broader industry engagement. A more inclusive approach, the association argued, would enhance credibility, foster compliance, and allow regulators to better understand the diversity of business models within the ecosystem.
Inclusion of Payment Firms Sparks Debate
VASPA also pointed to the inclusion of major payment companies such as Flutterwave and Paystack in the pilot, noting that both firms are primarily Payment Service Providers (PSPs) rather than traditional VASPs.
While this has sparked debate, the association suggested that their participation reflects a strategic regulatory intent to better understand the intersection between fiat payment systems and digital asset markets.
According to VASPA, this could enable regulators to:
- Track fiat-to-crypto transaction flows
- Assess systemic risks linked to crypto exposure
- Strengthen AML controls, including compliance with the FATF “Travel Rule”
The association further noted that the growing involvement of such firms in stablecoin-related activities underscores their relevance in the broader digital finance landscape.
Implications for the Industry
Despite its concerns, VASPA commended participating firms, describing them as early movers in a supervisory framework that could shape the future of digital asset regulation in Nigeria.
The pilot is expected to focus on critical compliance areas, including FATF Recommendations 15 and 16, cross-border transaction monitoring, and Travel Rule implementation. Insights generated from the programme are likely to influence future regulatory frameworks and help bridge the gap between innovation and financial system stability.
For operators not included in the initial phase, VASPA encouraged continued alignment with global best practices, particularly in strengthening AML/CFT controls. It also urged stakeholders to leverage its role as a Self-Regulatory Organisation (SRO), recognised by the Nigeria Financial Intelligence Unit, to contribute to ongoing national risk assessments on virtual assets.
Call for Greater Inclusion
Looking ahead, VASPA reaffirmed its commitment to engaging with regulators to promote a more transparent and inclusive framework. The association indicated plans to formally advocate for an open-call participation model in future phases of the pilot.
It emphasised that a more inclusive approach would strengthen market integrity, boost investor confidence, and support the sustainable development of Nigeria’s digital asset ecosystem.
VASPA is a pan-African industry body representing virtual asset stakeholders, focused on promoting best practices, regulatory alignment, and responsible growth across the continent’s digital finance landscape.
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