The Virtual Asset Service Providers Association has welcomed the Central Bank of Nigeria’s (CBN) move to deepen regulatory oversight of the country’s virtual asset ecosystem but has raised critical concerns over the structure and inclusiveness of the ongoing supervisory pilot.
Techeconomy had reported that the apex bank launched a pilot supervisory programme focused on selected Virtual Asset Service Providers (VASPs).
Behind this move lies a deeper concern: safeguarding the financial system from the shadows of money laundering, terrorism financing, and proliferation threats. With the digital asset space evolving at a rapid pace, the CBN’s initiative signals a proactive effort to understand and manage the risks shaping this new financial frontier.
The initiative, anchored on existing legal frameworks including the Money Laundering (Prevention and Prohibition) Act 2022 and the Banks and Other Financial Institutions Act 2020, signals a more structured regulatory engagement with operators in the virtual asset ecosystem.
In a detailed position statement, VASPA described the initiative as a positive step toward aligning Nigeria’s digital asset market with global anti-money laundering (AML) and counter-terrorism financing (CFT) standards, particularly those set by the Financial Action Task Force.
However, the association warned that aspects of the pilot could undermine broader industry trust and participation if not addressed.
Concerns Over Handpicked Participation
At the center of VASPA’s concerns is the selection process for the pilot programme, which it described as lacking transparency.
According to the association, there was no open call or application process, with participating firms reportedly selected directly by the Central Bank of Nigeria. VASPA noted that even future cohorts appear to be closed to external expressions of interest.
The association contrasted this approach with globally recognized regulatory sandboxes such as those run by the Financial Conduct Authority and the Monetary Authority of Singapore, which rely on transparent, criteria-driven application processes.
“By handpicking participants and limiting access, there is a risk of creating an uneven playing field,” VASPA stated, adding that a more inclusive framework would improve credibility and foster wider compliance across the ecosystem.
VASPA emphasized that an open, competitive process would not only strengthen public trust but also enable regulators to engage with a broader range of business models within Nigeria’s rapidly evolving virtual asset space.
Inclusion of Payment Giants Sparks Debate
Another notable development highlighted by VASPA is the inclusion of major payment companies such as Flutterwave and Paystack in what is primarily a virtual asset service provider (VASP) pilot.
While acknowledging their prominence in Nigeria’s financial ecosystem, VASPA pointed out that both firms are Payment Service Providers (PSPs) rather than traditional VASPs.
However, the association interpreted their inclusion as a strategic move by regulators to monitor the intersection between fiat financial systems and crypto markets.
VASPA outlined several possible objectives behind this decision:
- Tracking fiat-to-crypto flows: Enhancing visibility into how funds move from bank accounts into digital asset platforms
- Assessing systemic risk: Understanding indirect exposure of traditional finance to crypto activities
- Strengthening AML controls: Testing how payment gateways integrate with blockchain systems, particularly in meeting FATF “Travel Rule” requirements
The association also noted that both companies have recently been linked to stablecoin-related initiatives, reinforcing their relevance in the evolving digital finance landscape.
Industry Milestone with Long-Term Implications
Despite its concerns, VASPA congratulated the selected participants, describing them as pioneers entering a structured supervisory environment that could shape the future of digital asset regulation in Nigeria.
The pilot is expected to focus on key compliance areas such as:
- FATF Recommendations 15 and 16
- Cross-border transaction monitoring
- Travel Rule implementation
VASPA said insights from the pilot could play a critical role in bridging the gap between innovation and financial system stability.
“These entities carry a unique responsibility to set precedents that will define the regulatory trajectory for Nigeria’s digital asset industry,” the association noted.
Message to Excluded Operators
For VASPs not included in the inaugural cohort, VASPA urged patience and continued alignment with global compliance standards.
The association encouraged operators to strengthen AML/CFT frameworks and leverage its recognition as a Self-Regulatory Organisation (SRO) by the Nigeria Financial Intelligence Unit to contribute to Nigeria’s ongoing National Risk Assessment on virtual assets.
Call for a More Inclusive Framework
Looking ahead, VASPA reaffirmed its commitment to engaging regulators and advocating for a more transparent and inclusive regulatory approach.
The association disclosed plans to formally engage the CBN on behalf of its members, pushing for an open-call system that allows qualified operators to participate in future phases of the pilot.
“A transparent and inclusive pathway will strengthen market integrity, boost confidence, and ensure that Nigeria’s digital asset ecosystem evolves in a balanced and sustainable manner,” VASPA stated.
The Virtual Asset Service Providers Association is a pan-African industry body representing virtual asset stakeholders across the continent. Registered in Nigeria, the association brings together individual, corporate, and institutional members to promote best practices, regulatory alignment, and sustainable growth within Africa’s digital asset ecosystem.
