As Nigeria solidifies its position as a global leader in cryptocurrency adoption, KPMG has urged the country’s financial institutions to embrace blockchain technology and form partnerships with cryptocurrency firms.
The advisory firm’s latest report challenges Nigerian banks to move beyond cautious approaches and actively leverage digital finance opportunities to remain competitive in the evolving financial landscape.
KPMG’s March 2025 report, “Crypto Risk and Opportunities in Nigeria: A New Banking Paradigm,” provides an in-depth analysis of the resilience of Nigeria’s crypto market, the evolving regulatory landscape, and the potential for blockchain technology to transform banking operations. However, the report also underscores the challenges posed by the Central Bank of Nigeria (CBN), which continues to stifle cryptocurrency adoption within the financial sector.
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CBN’s Restrictions Have Stymied Crypto Adoption
Despite KPMG’s recommendations, Nigerian banks remain constrained by the CBN’s longstanding restrictions on cryptocurrency-related transactions. While many financial institutions have shown a willingness to explore cryptocurrency services and integrate blockchain solutions, the CBN’s firm stance has prevented them from doing so.
The CBN first imposed a ban on cryptocurrency transactions in February 2021, instructing all commercial banks and financial institutions to block accounts linked to cryptocurrency trading. The apex bank also threatened severe sanctions against any institution that violated its directive, including hefty fines. This aggressive regulatory posture effectively shut down formal crypto adoption within the Nigerian banking sector, forcing crypto users and exchanges to operate through informal peer-to-peer (P2P) networks.
Although the CBN eased its stance in December 2023 by allowing banks to offer services to Virtual Asset Service Providers (VASPs) under strict regulations, it continued to prohibit banks from holding, trading, or directly transacting in cryptocurrencies. This halfway measure has left the financial sector in limbo, with banks hesitant to fully engage in crypto-related activities due to fears of a regulatory backlash.
The Impact of CBN’s Restrictions on Crypto Growth
KPMG’s report highlights how the CBN’s restrictions have ultimately failed to curb crypto adoption in Nigeria. Instead, they have driven the sector underground, with users relying heavily on P2P transactions to bypass banking restrictions.
According to data from blockchain analytics firm Chainalysis, Nigeria recorded $59 billion in cryptocurrency transactions between July 2023 and June 2024, making it the largest crypto market in Africa. The country’s crypto inflows rebounded by 25% in 2024, despite the banking sector’s exclusion from digital asset services.
The report also underscores how high remittance costs in traditional banking channels have fueled Nigeria’s growing reliance on cryptocurrencies. Many Nigerians, particularly those in the diaspora, prefer crypto for cross-border transactions due to its lower fees and faster processing times.
However, the lack of banking integration has created inefficiencies in the market, preventing Nigerian banks from tapping into the lucrative digital asset economy. The absence of formal banking support has also exposed crypto users to greater risks, including scams, fraud, and security breaches.
Regulatory Shifts and Emerging Opportunities
While the CBN’s restrictions have slowed institutional crypto adoption, Nigerian regulators have begun shifting toward structured engagement with the sector.
The CBN introduced guidelines for VASPs, allowing licensed crypto firms to open bank accounts and offer limited financial services. Similarly, the Securities and Exchange Commission (SEC) launched the Accelerated Regulatory Incubation Program (ARIP) to provide a framework for crypto firms to operate legally under regulatory oversight.
These developments indicate a gradual policy shift, but KPMG argues that they do not go far enough. The firm stresses that Nigerian banks must be allowed to fully integrate blockchain technology into their operations to remain competitive in the digital economy.
Why Nigerian Banks Must Embrace Blockchain
KPMG’s report strongly advocates for Nigerian banks to adopt blockchain technology, arguing that it could revolutionize compliance, operational efficiency, and financial inclusion.
Banks can better detect illicit financial activities and enhance transparency in financial transactions by incorporating blockchain analytics into their compliance frameworks. Blockchain-based solutions can also streamline banking operations, lower transaction costs, and unlock new financial services, particularly in cross-border payments and remittances.
“Forward-thinking banks can position themselves at the forefront of an increasingly digital financial system by leveraging blockchain technology,” KPMG stated.
The firm also noted that beyond compliance, banks that adopt blockchain innovations would be better positioned to compete with fintech and crypto-native companies, which are already capitalizing on digital finance trends.
The Future of Crypto in Nigerian Banking
Despite the regulatory roadblocks, KPMG’s report suggests that Nigerian banks cannot afford to ignore the crypto revolution. The increasing adoption of digital assets, combined with global advancements in blockchain technology, presents a unique opportunity for financial institutions to modernize their operations.
KPMG warns that if Nigerian banks fail to adapt, they risk being left behind as fintech firms and decentralized finance (DeFi) platforms continue to capture market share. The report concludes that for Nigeria to fully harness the benefits of digital finance, regulators must adopt a more progressive approach—one that balances risk management with innovation.
The question now is whether the CBN will finally step out of the way and allow the financial sector to embrace the inevitable shift toward cryptocurrency and blockchain technology.