Nigeria, once regarded as Africa’s cryptocurrency leader, is facing growing pressure from rival markets as Kenya, South Africa and Ghana adopt regulatory approaches that industry players say are more attractive to investors and startups.
While Nigeria’s Securities and Exchange Commission (SEC) has introduced one of Africa’s toughest licensing regimes, Kenya has moved in the opposite direction by lowering the capital requirement for stablecoin issuers after consulting industry stakeholders. South Africa continues to expand its regulated digital asset market, while Ghana is also advancing a regulatory framework that many see as more accommodating for innovation.
The contrasting approaches are reshaping competition for crypto investment, talent and global digital asset companies across Africa.
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Kenya last week cut the minimum paid-up capital requirement for stablecoin issuers by 40 percent to KSh300 million from KSh500 million proposed in draft regulations released in March.
The reduction followed consultations with industry participants, but the government retained strict oversight powers for the Central Bank of Kenya (CBK), creating a framework that combines lower entry costs with tight consumer protection.
The regulations give the CBK authority to suspend the issuance or redemption of stablecoins and require licensed exchanges and wallet providers to remove any stablecoin from their platforms if directed by the regulator.
The rules also require every stablecoin to be fully backed by reserves on a one-to-one basis, mandate quarterly stress tests, guarantee redemption within two working days, and hold directors and auditors personally liable for misleading disclosures.
At least 30 percent of customer funds must be kept in segregated trust accounts at Kenyan commercial banks, while the remaining reserves must be invested in approved Kenyan assets.
Analysts say the framework reduces one of the biggest barriers to entry without weakening regulatory supervision.
The move comes as Kenya strengthens its position in one of the world’s fastest-growing crypto markets. According to Bybit’s 2025 World Crypto Ranking, Kenya ranked fifth globally for cryptocurrency adoption, with stablecoins accounting for a large share of transactions because they are widely used for cross-border payments and as a hedge against local currency volatility.
Nigeria, by contrast, has chosen to raise the financial threshold for operators.
The SEC now requires Digital Asset Exchanges and Digital Asset Custodians to maintain a minimum paid-up capital of N2 billion, while other virtual asset service providers must meet capital requirements ranging from N300 million to N1 billion, depending on their licence category.
The regulator says the tougher rules are designed to strengthen investor protection, improve corporate governance and reduce systemic risks as digital assets become more integrated into the financial system.
Companies have until June 30, 2027, to comply or risk losing their licences.
However, the policy has divided the industry.
Olayimika Oyebanji, legal consultant to the House of Representatives Ad-Hoc Committee on the Economic, Regulatory and Security Implications of Cryptocurrency Adoption and PoS Operations, told BusinessDay that the committee had earlier urged the SEC to reduce what it considered excessive capital requirements, warning that they could hurt innovation and discourage local participation.
Instead, the regulator increased the requirement to N2 billion.
“Capital requirement is a prudential tool. It shouldn’t be a burden. Early economic research into regulation has largely focused on quantifying the costs and benefits. In the case of Nigeria’s nascent crypto ecosystem, the costs of a prohibitively high capital requirement far outweigh the benefits. The implication is that smaller firms will be forced to shut down or move to a friendlier jurisdiction. It could also lead to a trade-off between innovation and the need to a specific harm,” he posited.
He believes Kenya’s decision to lower capital requirements after industry engagement demonstrates the value of regulatory consultation and could strengthen the country’s competitiveness.
“Smaller crypto startups in Nigeria are already quitting the market in droves. The SEC has made it clear that VASP licence is for well-capitalised firms. In most cases, this gives foreign players a significant advantage over local crypto firms. The N2 billion increase, the SEC announced earlier this year makes Nigeria the most expensive crypto market for VASPs in Africa.
“There are countries with better and forward-looking crypto regulations in Africa. Countries like South Africa, Kenya and Ghana are poised to overtake Nigeria any time soon,” he added.
Similar concerns have also been raised by Obinna Iwuno, chief executive of CBC Blockchain Services, who argued that Nigeria has become one of Africa’s most expensive jurisdictions for crypto licensing, putting local startups at a disadvantage against foreign firms with larger balance sheets.
He warned that many early-stage companies may relocate to countries with lower regulatory costs or abandon the market altogether.
“Local competition is dead. Many of these companies are trying to raise only $100,000 to grow their businesses. Asking them to provide N2 billion in capital makes entry almost impossible,” he told BusinessDay.
Iwuno called for a tiered licensing system that would allow startups to grow gradually while maintaining appropriate regulatory oversight.
However, supporters argue that higher capital requirements will eliminate weak operators and improve confidence in Nigeria’s digital asset market.
Sir Demola Aladekomo, founder and former chairman of CHAMS Plc, said the SEC’s decision reflects the scale and risks of cryptocurrency transactions.
“The business of crypto is global. It is going on whether we like it or not. We must commend the SEC for being proactive in ensuring that we regulate it properly,” Aladekomo told BusinessDay.
He described the N2 billion capital requirement as appropriate for businesses handling large volumes of customer assets and said smaller operators should consider mergers or acquisitions if they cannot meet the new standards.
Beyond licensing costs, the differences between the two markets are becoming increasingly clear.
Kenya has removed capital requirements for some advisory businesses while maintaining strict rules on reserve management, liquidity and consumer protection.
Nigeria has largely focused on raising financial thresholds, with critics arguing that the approach favours large, well-capitalised firms over local startups.
Industry analysts say the debate is no longer simply about regulation versus deregulation. Instead, it is becoming a contest over which African market can strike the right balance between protecting investors and encouraging innovation.
That competition is growing more important as global stablecoin issuers, digital asset exchanges and blockchain companies look for regional headquarters in Africa.
South Africa has already built a relatively mature regulatory environment by bringing crypto asset service providers under financial sector supervision. Kenya is now positioning itself as a destination for stablecoin businesses through a combination of regulatory certainty and lower entry barriers, while Ghana is accelerating work on its own digital asset framework.
Together, the three countries are increasingly challenging Nigeria’s long-held leadership in Africa’s cryptocurrency industry.
Read also: Terrorists turn to drones, cryptocurrency as Nigeria’s insurgency enters new technological phase – UN
For Nigeria, the stakes extend beyond digital assets. The country remains one of the world’s largest crypto markets by user adoption and transaction volumes, but analysts warn that leadership will increasingly depend on the quality of regulation rather than market size alone.
If capital requirements continue to rise faster than innovation can keep pace, they say, investment, talent and new blockchain businesses could gradually shift toward jurisdictions where regulators are viewed as more responsive and proportionate.
The race to become Africa’s crypto hub is no longer being decided by adoption alone. It is now being shaped by regulation, and Nigeria risks falling behind if it cannot convince entrepreneurs that protecting investors does not have to come at the expense of building the next generation of digital finance companies.
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