Between 2021 and 2023 the Central Bank of Nigeria (CBN) had a well-known defensive posture towards virtual assets. Now in 2026, it is taking a proactive approach to regulating virtual assets, with a Virtual Assets Regulatory Council and an Executive Order to improve supervisory coordination and harmonize the regulation of virtual assets.
“With relevant agencies operating in silos, overlapping in some areas and leaving gaps in others, the country has been exposed to risks, including money laundering, terrorism financing, cybersecurity and data privacy threats, fraud, and revenue losses. Too often, unregistered and fraudulent operators have exploited these gaps to prey on unsuspecting Nigerians, costing families their savings.
The Order is designed to close these gaps through supervisory coordination, without introducing new layers of regulation or displacing the mandates of existing agencies.” – Nigeria State House Press Release, July, 2026
This deliberate approach aims to safeguard the integrity of the financial system while enabling responsible innovation, and the CBN is already demonstrating its new posture and openness to innovation by opening a sandbox to virtual asset service providers (VASPs). This supervised testing environment will provide the visibility required to build the evidence base for a licensing regime to follow. Launched August 11th, Cohort 2 of the CBN Regulatory Sandbox carries a dedicated VASP track, and it runs on a modular, modern Digital Regulatory Platform.
A Regulatory Perimeter Worth Waiting For
Nigeria is Africa’s most populous country and has been one of the world’s top users of crypto and virtual assets. The International Monetary Fund expects its sheer economic momentum to make it one of the top ten drivers globally of real growth this year. For most of the last decade, though, its relationship with virtual assets was contradictory.
- In February 2021, the CBN ordered banks to close the account of anyone touching a crypto exchange.
- In May 2022, the SEC issued Rules on Digital Assets while the CBN ban was still in place.
- Nigerians were already transacting more crypto than almost anyone else on earth: $56.7 billion between July 2022 and June 2023, and roughly $92 billion between July 2024 and June 2025, consistently ranking second worldwide (Chainalysis).
- In December 2023, the CBN allowed banks to bank VASPs under restrictive guidelines.
Given the global and decentralized nature of virtual assets, banning and choking didn’t slow adoption down. Its effect was to push the activity into unregulated peer-to-peer trading and personal bank transfers outside the CBN’s supervisory perimeter, arguably a worse outcome for a regulator than the activity it set out to contain.
It is important to appreciate that during this time the CBN was fighting a big battle to defend the naira currency, unify the exchange rate, and stabilize the market, jobs only the central bank is mandated to do. That fight consumed most of the CBN’s attention for the better part of 2021–2023. It unified a naira that had been trading on three or four different rates, wrestled inflation down from north of 30%, and addressed Nigeria’s FATF grey list deficiencies, an exit that was successfully secured in October 2025. Then CBN spent much of 2024 clearing an estimated $7 billion FX backlog and stabilizing the market.
The high inflation and naira devaluation coupled with the timing of more accessible USD-stablecoins is part of what drove retail consumers to unregulated crypto — especially stablecoin — usage during this time, which in turn generated more attention to Nigeria in the crypto media and in regulatory research. A now-resolved legal standoff with one of the world’s largest crypto exchanges also contributed to additional attention.
Ready to Regulate Virtual Assets Proactively and Deliberately
What follows next is a deliberate and tangible change in approach heralding a shift in Nigeria’s regulatory trajectory. The trajectory has already started with a focus on harmonization, clarity, and modern tools for modern innovation.
- In February 2026, the Virtual Assets Regulatory Authority (VARA) was stood up and its draft white paper, Future-Proofing Nigeria’s Digital Economy: A White Paper on Virtual Asset Regulation, was circulated.
- This also established the Virtual Asset Regulatory Office (VARO), an operational front door providing consistency and visibility in supervisory oversight for all non-security virtual assets, and a cross-agency coordination mechanism.
- In July, the Executive Order on Virtual Assets Coordination formalized a more proactive approach: regulatory clarity, more clearly defined jurisdictional boundaries, stronger oversight of illicit finance and consumer protection, and a more enabling environment for compliant operators. The order also established:
- A Virtual Asset Council, to harmonize regulatory roles and close fragmentation and gaps in oversight across the CBN, the SEC, the Nigeria Revenue Service, the NFIU, and the Office of the National Security Adviser;
- The Virtual Asset Office, the Council’s operational body, with its secretariat domiciled at the CBN.
Just a month following this, the CBN launched a dedicated VASP track in its regulatory sandbox. It chose to launch it on a modular, streamlined, API-first Digital Regulatory Platform.
A Regulatory Innovation to Meet the Market
The CBN is not employing the sandbox mechanism as a vanity tool. It is a strategic part of Nigeria’s approach to safely welcome and catalyze innovation in its own market. When designed and deployed well, a regulatory sandbox should be able to be this and more.
Regulators need modular, flexible API-first platforms to effectively supervise increasingly dynamic and complex financial ecosystems, ecosystems now being transformed by tokenized finance. They cannot risk poor or delayed supervision. Nor can they leave VASPs outside the supervisory perimeter today without a structured way to bring them in, even on a testing basis.
This sandbox VASP track, launched on a Digital Regulatory Platform, gives the CBN and other agencies their first source of live market data on how different VASPs behave and the ability to test compliance frameworks against them. Real data and tangible insights give regulators the confidence to write proportionate, risk-based frameworks and tiered licensing.
It also offers something to providers, with a tangible way to constructively engage with the regulator, and a common basis of data for all parties as the bedrock for assessing risk and defining compliance.
The tool only works if the sandbox is modern enough to observe the models and manage the data that enters it. For virtual assets and VASPs, money moves in minutes, and a periodic return describes a market that has already changed. Regulators need to take serious heed of the risk of a widening ‘Innovation Delta’ — the gap between regulators’ capacity to regulate and supervise financial innovation and the rate of financial innovation itself, as letting it widen is how consumer harm, unmanaged risk, and regulatory arbitrage take hold.
There is both a temporal mismatch — products mature in the market before regulators can license and supervise them properly — and unsatisfactory adoption of regulatory technology (RegTech or SupTech), where central banks and financial regulators must adopt modern technological solutions and platforms to fulfil their mandates supervising market integrity, financial stability, market conduct, and more (described well by the Cambridge Centre for Alternative Finance).
Closing this gap is an architectural question as much as a policy one, and Nigeria is adopting this as a design principle evidenced by the Digital Regulatory Platform that CBN chose to build its sandbox on.
“The tool only works if the sandbox is modern enough to observe the models and manage the data that enters it…. Real data and tangible insights of this kind are what give a regulator the confidence to write proportionate, risk-based frameworks and tiered licensing rather than blanket rules.”
Regulators Need a Digital Regulatory Platform to Manage the Innovation Delta
An Executive Order gives the ‘Go,’ but regulators need the tools to put data sharing and collaborative risk assessment into practice, week in and week out, in a practical way.
By powering its sandbox with a Digital Regulatory Platform, the CBN is laying the groundwork for broader SupTech and operationalizing the collaboration among regulators to reduce illicit finance, catch scams, and monitor market behavior. This is 95% of the work. Without these tools, they risk a widening innovation delta that compounds risk through lack of visibility and slow coordination.
Closing that delta takes a platform that can ingest data easily and immediately from multiple sources, streamline workflows across departments and agencies, and move application reviews and case management off email and spreadsheets. A sandbox run on email threads and shared spreadsheets produces thin evidence, and thin evidence makes for weak or unworkable licensing regimes down the line. It has to close the same gaps a live market does: money laundering and terrorist financing exposure, financial soundness, data privacy, fraud, and the revenue loss that comes from unsupervised activity.
How an API-first Digital Regulatory Platform Closes the Innovation Delta
Central banks know what regulators actually need in order to develop a strong and workable licensing regime: visibility into what participants are doing while they’re doing it, evidence of how a business model behaves under live conditions, and a transparent, efficient process to evaluate both, which makes risk legible and builds trust in a new market.
Visibility. Participants submit structured data over APIs, continuously, rather than filing periodic returns that are already out of date by the time they land in an inbox, and every submission runs through automated validation against a unified template before it reaches a supervisor’s desk. Secure, standardized exchange between the regulator and the firm replaces manual reporting with proactive risk monitoring. This is how the CBN defends the stability and FATF recognition it earned.
Evidence. CBN is able to observe conduct of live business models, and to test compliance frameworks in a live market. This observation teaches the regulator more about these technologies than any filing could, building regulator confidence and directly informing the nascent regulatory frameworks.
Risk made legible. Because CBN staff need more than raw data to do their jobs, the platform layers in configurable risk scoring and sector-level dashboards, so a supervisor can see where risk is concentrating across the whole cohort, not only within a single case file.
Transparent and efficient processing. Fragmented systems allow risks to hide in the gaps between agencies. Applications, cohort selection, testing parameters, reporting obligations and exit criteria are all managed on one platform, with automated workflows and real-time status tracking. When a regulator scales beyond the Sandbox module on the Digital Regulatory Platform, the transition from sandbox participant to licensed entity continues the same case file, holding the applicant’s full history in one place — reducing overhead time for the regulator reviewing and the company applying.
From Sandbox to Supervision to Compliance Infrastructure
With a modular platform that can run from sandbox to licensing to supervision, the progression can be even broader and serve as an entry point to compliance across different agencies. Once VASPs are exchanging structured data over APIs, the same platform can expand for other authorities, and the sandbox becomes the entry point to compliance infrastructure for the whole virtual asset market.
Nigeria is already demonstrating that intentional build. The Nigeria Revenue Service (NRS) is piloting virtual asset tax collection on its own API-first module, the Nigeria Virtual Asset Tax Compliance Gateway. The list of tax rules becomes an engine, and the engine sits behind a single API. For the market, that makes compliance something an operator opts into rather than a convoluted path they have to navigate.
A sandbox this deliberately designed does more than test individual applicants. It gives the CBN the operational capacity to catalyze virtual asset innovation while safely steering it, and it gives Nigeria’s new Virtual Asset Council a live feed of evidence to inform the harmonized framework it’s now building. Regulators gain confidence in a market they can finally see clearly. Providers gain a credible, transparent path from testing to licensing. And Nigeria gains a virtual asset ecosystem positioned to be both innovative and resilient, which is the actual result that the CBN and the Executive Order are aiming for.
About EMTECH
EMTECH is an award-winning, pioneering provider of modern central banking technology and services. Our platform connects central banks and Financial Service Providers in a seamless way for various activities such as Sandboxing, Licensing, Supervision, Compliance and Currency Management.
Headquartered in New York with a globally distributed team, EMTECH builds enterprise software as a service that digitalizes central banking services and makes them highly consumable via APIs, smart contracts and AI.
About the Author
Jill Lagos Shemin is deeply focused on modernizing financial ecosystems and the infrastructure for broader access to finance. She is dedicated to working on tokenization and with stakeholders to assess how to manage and grow the quickly digitalizing financial ecosystems of today’s world.
She has been working for over 10 years in digital financial services in emerging markets at the edge of innovation, product, and policy. Her work spans many areas of digital development and the digital finance ecosystem, including regulatory innovation, fintech regulation, consumer protection, and payments.
She is currently the Director of Policy, Strategy, and Capacity Services at EMTECH, providing modern regulatory infrastructure to central banks and regulators for stablecoins, digital assets and regulatory sandboxes to manage innovation. Prior to EMTECH, she worked at the Cambridge Centre for Alternative Finance at the University of Cambridge Judge Business School and still holds a role there as a Research Affiliate.
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