CBN Virtual Asset AML/CFT Pilot Enhances Oversight, Maintains Regulatory Status Quo

By Olumide Johnson

The Central Bank of Nigeria (CBN) recently commenced a pilot Anti-Money Laundering, Counter-Financing of Terrorism, and Counter-Proliferation Financing (AML/CFT/CPF) supervisory programme targeting selected Virtual Asset Service Providers. The Governor of CBN, Mr. Olayemi Cardoso, authorised the directive, with firms including Paystack, Flutterwave, KuCoin, and cNGN listed for initial engagement.

DECISION HIGHLIGHT

• Launch of risk-based supervisory pilot for virtual asset operators
• Inclusion of major fintech and crypto-adjacent firms
• Monthly reporting, governance reviews, and compliance assessments mandated
• Alignment with Financial Action Task Force standards, including the Travel Rule

DECISION MEMO
The pilot reflects a calibrated regulatory escalation rather than a policy overhaul. By explicitly stating that the programme does not alter existing frameworks, the CBN is asserting supervisory authority without encroaching on the statutory role of the Securities and Exchange Commission (SEC) as digital asset regulator under the Investments and Securities Act 2025.

Cardoso’s approach suggests a dual-track model, regulatory clarity on one side and supervisory depth on the other. The pilot is designed to interrogate operational realities within virtual asset firms, particularly around transaction monitoring, onboarding controls, and cross-border flows. This indicates a recognition that regulatory frameworks alone are insufficient without granular visibility into firm-level practices.

The inclusion of firms such as Paystack and Flutterwave signals a broadened regulatory perimeter. While not purely crypto-native entities, their integration into digital payments ecosystems exposes them to virtual asset-related risks. This widens the compliance burden across the fintech stack, not just dedicated exchanges.

The requirement for adherence to the Financial Action Task Force Travel Rule introduces a structural shift in data sharing obligations. However, implementation remains technically complex and commercially sensitive, particularly in a fragmented ecosystem with varying compliance maturity.

Nigeria’s removal from the Financial Action Task Force grey list in October 2025 provides the immediate policy context. The pilot can be interpreted as a continuity measure to sustain compliance gains and prevent regulatory relapse. Yet, the absence of licensing implications underscores a persistent ambiguity, firms are supervised, but not formally recognised within a unified licensing regime.

The involvement of the Nigeria Financial Intelligence Unit reinforces enforcement intent. However, effectiveness will depend on inter-agency coordination within the emerging Virtual Asset Regulatory Council (VARC) structure, where overlapping mandates risk regulatory friction.

Overall, the initiative tightens oversight while deferring full regulatory consolidation, reflecting a cautious, iterative approach to governing a rapidly evolving asset class.

DATA BOX

• Cryptocurrency transaction volume: $92.1 billion (July 2024 to June 2025)
• Comparative scale: nearly three times South Africa’s volume
• FATF status: removed from grey list in October 2025 (listed since February 2023)
• Reporting requirement: monthly AML/CFT/CPF metrics submission

WHO WINS / WHO LOSES
Wins:

• Regulators, through enhanced visibility into virtual asset activities
• Compliant firms with established governance frameworks
• Nigeria Financial Intelligence Unit, via strengthened enforcement role

Loses:

• Smaller or less compliant Virtual Asset Service Providers
• Firms with opaque transaction flows
• Market participants reliant on regulatory ambiguity

POLICY SIGNALS

• Reinforcement of risk-based supervision over immediate regulatory expansion
• Continued alignment with global anti-money laundering standards
• Emergence of multi-agency oversight architecture in digital assets

INVESTOR SIGNAL

• Improved regulatory clarity on compliance expectations
• Increased operational costs for virtual asset and fintech firms
• Medium-term stabilisation potential, contingent on coherent regulatory coordination

RISK RADAR

• Fragmentation of oversight across multiple regulatory bodies
• High compliance costs, particularly for smaller operators
• Technical challenges in implementing the Travel Rule
• Regulatory uncertainty due to absence of unified licensing regime
• Potential innovation slowdown under increased supervisory pressure