When Franklin Peters founded the crypto startup Bitfxt in 2017, he set out to provide three solutions: a crypto payment gateway, a cross-border remittance product, and a crypto trading platform. At its peak in 2019, Bitfxt was processing “tens of millions” of transactions annually. The company was in the middle of a fundraising round when a seismic event changed its trajectory.
On February 5, 2021, the Central Bank of Nigeria (CBN) barred banks from facilitating crypto transactions. This forced banks to close the accounts of crypto companies, locking them out overnight. In a matter of days, a thriving sector was forced underground. While some exchanges rejigged their business models, for Bitfxt, LocalBitcoins, and Paxful—once pioneers of crypto trading—the ban was fatal.
A bull market
During the bull run of 2017, Bitcoin crossed $10,000 for the first time, raising awareness of digital assets. Nigerians eagerly joined the market, hoping to make crypto money but buying Bitcoin in 2017 was difficult.
Existing crypto exchanges were not built for Nigeria, making it difficult to buy crypto with Naira. Buyers either sent money to a contact abroad to buy Bitcoin from a foreign exchange, which would then be transferred to a decentralised wallet or relied on WhatsApp groups to interact with crypto traders. Both methods carried some risks, particularly the threat of falling victim to scams due to the lack of secure and regulated platforms.
Bitfxt was a crypto trading platform that allowed Nigerians to buy crypto with Naira. It made money from token listing fees and transaction charges. With listings, the startup charged crypto token creators an integration fee for listing on its app. However, revenues weren’t enough to sustain its overhead and operating expenses.
“We were not ever profitable; we never had extra cash to keep,” said Peters, former founder of Bitfxt. “The money always went back to paying our engineers.”
Due to the shortage of local blockchain talent, Bitfxt hired Indian engineers, paying them in dollars while earning revenue in Naira. These engineers maintained the platform and managed token integrations—one of the company’s primary income streams.
“There was a lack of education and legitimacy around crypto back then,” said Peters. “Nigerian software engineers didn’t want to risk it, so they stayed in Web2 jobs. We had no choice but to hire foreign engineers.”
By 2020, the challenges mounted. Foreign exchanges like Binance, Huobi, and OKX entered Nigeria, with deeper pockets and global experience, expanded to Africa, undercutting local crypto startups. Their entry coincided with a second bull market cycle, when Nigerians, cash in hand, queued again to buy Bitcoin, hoping to turn profits. Swooping in to attract these buyers, foreign exchanges engaged in pricing wars on transaction fees and attracted top-tier blockchain engineers.
Facing stiff competition, Bitfxt struggled to raise capital, and a failed funding round in 2020 left it on shaky ground. Without sufficient capital to continue running Bitfxt, Peters shuttered the business for months, later rebranding and pivoting it to Boundlesspay in 2021. Then came the final nail in the coffin—the CBN ban.
A seismic shift
“When the [crypto ban] happened, everybody—crypto exchanges—was affected, including us,” said Peters, now CEO of crypto remittance startup Boundlesspay. “That was when the first version of Boundlesspay was supposed to launch. And in that first version, we had a bank partnership that allowed us to integrate their core infrastructure into our system. This allowed our users to buy virtual assets on our platform.”
Banks became cautious of crypto transactions because the crypto industry was very risky. Checking these risky transactions took a lot of time and money, which banks didn’t like, especially since they already followed strict rules. Banks wanted to protect their customers’ deposits and avoid fines. Few businesses accepted crypto, and the risk of big losses made banks even more hesitant to get involved.
The ban hit customers the hardest. Nigerians suddenly found their accounts frozen if they had been linked to crypto transactions. Others couldn’t buy or sell their digital assets. For months, they were locked out of their crypto holdings.
For local startups, it was innovate or die. In 2021, there were 42 local and Africa-focused crypto startups operating in Nigeria, including Egoras, Cryptofully, Lopeer, Bitmama, NairaEx, BuyCoins, Fluidcoins, and VIBRA. Twenty-six of them shut down, were acquired, or pivoted due to regulatory challenges and liquidity shortages.
Once-thriving local crypto startups like Naijacrypto, NairaEx, and Bitfxt had gone under. In 2023, Lazerpay, which allowed businesses to process crypto payments, shut down in 2023, citing “uncertain regulatory framework around crypto in Nigeria.” Bundle Africa, another crypto startup, shut down its exchange platform to restructure its business. Paxful, a foreign crypto trading platform, temporarily exited Nigeria to focus on its global operations, returning one month later. In 2024, another crypto company, Helicarrier—formerly known as BuyCoins—also shut down its exchange platform over liquidity concerns. Web3 startups were reeling from the impact of the persisting bear market and the crash of popular crypto exchange FTX.
Adaverse-funded startup Payourse rebranded to Partna, shifting its focus to B2B remittance. Similarly, Y Combinator-backed iFlux (now known as Flux) pivoted from operating as a crypto exchange to providing traditional remittance services.
“Nobody wants to work with you anymore if you deal with crypto. We’ve had to rethink our approach,” Ben Eluan, CEO and co-founder of Flux told TechPoint in June 2024.
Yet, adversity met grit. The first wave of innovation came with the introduction of peer-to-peer (P2P) platforms, a trend started by foreign exchanges and quickly adopted by local startups adapting their models.
The CBN ban didn’t allow banks and payment providers to issue virtual accounts to crypto companies; so crypto startups tweaked the WhatsApp model of 2017, integrating it into their platforms. With P2P, users controlled liquidity; the startups were mere facilitators.
In 2021, Roqqu and Quidax launched their versions of P2P. Initially, the P2P space on platforms like Binance and Roqqu was not strictly regulated. With people allowed to self-regulate in their dealings with one another, scams and loss of funds became a dime a dozen.
After learning from this, Busha, another local crypto platform, introduced Busha Connect later in 2021, a service that uses verified merchants as middlemen to facilitate trades. While not a direct escrow, this setup allows Busha to maintain oversight of trading activities on its platform. It still uses the Busha Connect feature.
Today, crypto P2P trading exists, but crypto firms, in a bid to self-regulate during the era of regulatory uncertainty, started running verification checks on traders. They introduced Know Your Customer (KYC) and proof of fund measures for traders who sold crypto on their platforms.
Luno, a UK-based crypto company operating in Nigeria, chose an unconventional approach. After months of restricting withdrawals and deposits on its platform, Luno introduced a voucher payment system in 2021. Users created vouchers through a third-party platform, Afritickets, which allowed them to make payments into a virtual account, redeem the voucher, and buy crypto with the funds. However, users were still unable to liquidate their crypto on Luno during the ban.
On December 12, 2024, Luno announced it would phase out the voucher feature, yet it is still available. This indicates that the company has not yet established a strong enough relationship with banks to move beyond methods that helped it navigate years of regulatory uncertainty.
Despite innovations like P2P trading and voucher payments, liquidity remained a challenge. Operating without a bank account was difficult because, even as facilitators, these companies relied on revenue streams like token listings and other services. Surviving local crypto startups used offshore bank accounts to manage customer deposits, while multinational exchanges shifted focus to other markets. This pushed local startups to open accounts with crypto payment infrastructure providers like Circle and Nexo, which enabled them to manage liquidity by holding stablecoins. This offered an efficient alternative to traditional banking. However, it also required them to seek foreign licences to lend legitimacy to their businesses, as there was no clear pathway to obtaining a domestic crypto licence.
In 2023, Roqqu acquired a European Union virtual currency licence which allowed it to operate in 28 European countries. Another popular option was securing a Polish Virtual Asset Service Provider (VASP) licence. With crypto regulated in Poland, the relatively short processing time (between 2–12 weeks) and lower costs made this an attractive choice for local crypto firms aiming to appear compliant to offshore banking service providers.
Yellow Card, a US-based crypto startup that has thrived amid the uncertainty, expanded into Nigeria in 2019. However, during the ban, the startup chose to expand into other African markets to derisk its Nigerian operations. In October 2022, the startup expanded to Botswana where it first received a crypto licence. It currently operates in 20 African countries.
“The ban threw everybody off-balance. Exchanges that operated [only] in Nigeria couldn’t survive because they just operated in Nigeria,” said Lasbery Oludinmu, Yellow Card VP of Operations. “We never created P2P transactions because we understood the risk implications. Our business was impacted [by the ban], so we focused on building new features and expanding into markets where they were suited to generate revenue and grow our user base.”
Future outlook for crypto startups
In December 2023, Nigeria lifted its crypto ban—a shift from its anti-crypto stance. In August 2024, the country’s Securities and Exchange Commission (SEC) issued provisional licences to Quidax and Busha. Yet, it is hard to argue that startups that folded wouldn’t have survived under more favourable regulatory conditions.
Banks remain wary of the volatile asset class, as the Central Bank of Nigeria (CBN) has yet to provide clear regulatory guidance. This lack of clarity continues to stall banks, leaving them cautious of crypto to this day.
Binance’s soft exit—excluding Nigerians from its P2P platform last year due to regulatory issues—created a market vacuum that local crypto players are now eager to fill.
For crypto startups that have survived the regulatory turbulence, hope lies in leveraging blockchain technology to solve real-world problems, particularly in bridging traditional finance (TradFi) with decentralised finance (DeFi). However, compliance remains a critical priority.
“Crypto companies cannot overlook compliance again. At BoundlessPay, we’ve made it a priority to know every single user [over 15,000 of them] and monitor their activities on our platform at all times,” said Peters.
As the SEC tries to establish a framework for crypto, it is reportedly studying self-regulated startups to better understand how to oversee the industry in a way that balances innovation with compliance. So far, the regulator has standardised the use of Chainalysis, a blockchain intelligence platform that startups use to monitor and report crypto transactions.
Nigerian regulators are expected to implement more guidelines for the crypto industry, which for years, has operated like a ship without a rudder. The next few years will likely bring a more defined crypto landscape in Nigeria, but collaboration between the SEC and startup operators will remain key to success.
