Nigeria has launched a regulatory sandbox open to virtual asset operators, fintechs, financial institutions, and technology companies, representing the country's most coordinated effort yet to oversee its rapidly expanding digital finance sector — and a stark departure from the stance the CBN took just a few years ago, when it prohibited banks from facilitating cryptocurrency transactions.

The Central Bank of Nigeria (CBN) announced on Tuesday that applications for Cohort 2 of its Regulatory Sandbox Programme will open on August 12 and close on August 31. The programme features two distinct tracks. The first, a Virtual Asset Service Provider (VASP) track, is designed for companies offering stablecoins, payment and settlement services, custody, wallets, and related financial infrastructure. The second, a Data-Enabled Financial Services (Non-VASP) track, targets firms leveraging secure digital infrastructure and permission-based data sharing to enhance payments, credit, risk management, operational efficiency, and financial inclusion.

The initiative formalises a regulatory division of labor between Nigeria's two primary financial watchdogs. The CBN will oversee virtual assets used in payments — including stablecoins, settlement, custody, wallet management, and other transaction-based infrastructure services — while the Nigerian Securities and Exchange Commission (SEC) retains authority over digital assets that function as securities.

The CBN first began testing its supervisory approach in March through a pilot involving selected fintechs — including Flutterwave, Paystack, and Juicyway — to evaluate the stability of payment and cross-border transaction infrastructure tied to stablecoins under heightened regulatory monitoring. The new sandbox now gives the CBN a complementary testing framework alongside the SEC's Accelerated Regulatory Incubation Programme (ARIP), which admitted nine digital asset-based investment companies in July.

The CBN sandbox is expected to target stablecoin providers, on- and off-ramp operators, payment processors, settlement infrastructure operators, custody platforms, wallet-service providers, and other financial infrastructure firms supporting the movement, storage, and conversion of digital assets.

"The CBN Regulatory Sandbox provides a controlled environment in which eligible participants may test innovative financial products, services, business models, and enabling technologies under the supervision of the Central Bank," said Sidi-Ali Hakama, CBN's Acting Director of Corporate Communications, in a statement seen by TechCabal. "The programme enables the CBN and innovators to engage constructively throughout the testing process, supporting regulatory learning while encouraging responsible innovation that benefits consumers and the wider financial system."

The sandbox launch follows President Bola Tinubu's July 18 Executive Order establishing a harmonised regulatory authority under the Virtual Asset Council, which the CBN now chairs. The Nigeria Revenue Service (NRS) — which released a tax framework for virtual assets on August 3 — and the SEC serve as vice-chairs, while the Nigerian Financial Intelligence Unit (NFIU) and the Office of the National Security Adviser (ONSA) round out the council's membership.

The council's structure evolved from a virtual assets white paper published in February, which proposed a coordinated oversight framework led by the CBN, SEC, and NRS. The July executive order formalised and modified that proposal. Its stated objectives include harmonising regulation across agencies, closing supervisory gaps, strengthening anti-money laundering controls, improving consumer protection, and reducing fraud in a market that has grown rapidly with limited coordinated oversight. An inaugural council meeting was held at CBN headquarters in Abuja on July 29, signalling that implementation had moved from policy design into active institutional coordination.

The trajectory marks a significant reversal from February 2021, when the CBN directed banks and financial institutions to close accounts transacting in cryptocurrencies, citing risks to the financial system. That directive pushed much of Nigeria's crypto activity into peer-to-peer channels. The CBN lifted the banking restriction in December 2023, citing the need for clearer global regulatory standards, opening the door for the coordinated oversight framework now taking shape.

Nigeria remains one of the world's most active cryptocurrency markets. According to Chainalysis, Nigerians transacted approximately $92.1 billion in cryptocurrencies between July 2024 and June 2025, making it Africa's largest virtual assets market by transaction volume. Stablecoins are playing an increasingly prominent role in payments and remittances as fintechs build infrastructure around stablecoin-based payment rails, offering an alternative in an economy where the naira has experienced sustained depreciation and dollar access has at times been constrained.

The CBN emphasised that participation in the sandbox does not constitute a licence or authorisation to operate beyond approved testing parameters. Successful applicants must comply with safeguards covering consumer protection, operational resilience, cybersecurity, and regulatory reporting.

"The launch of Cohort 2 reflects the CBN's continued commitment to developing a transparent, proportionate, and risk-based regulatory environment that fosters innovation while preserving monetary and financial stability," Hakama said. "Insights from supervised testing will help deepen regulatory understanding of emerging technologies and inform the ongoing development of regulatory and supervisory frameworks for Nigeria's evolving digital financial ecosystem."

For virtual asset operators, the August 12–31 application window represents a key milestone: the first opportunity to enter the CBN's supervised testing environment under Nigeria's newly coordinated virtual assets regime. The outcomes of this cohort are likely to shape the licensing conditions and operational rules that will govern digital asset businesses in Africa's largest crypto market — a signal other African regulators will be watching closely as they calibrate their own approaches to virtual asset oversight.