Crypto Compliance in West Africa: Challenges, Gaps, and the Road to Travel Rule Readiness

We have sat down today with Abraham Udu, a Director of Programs at Association of Certified Financial Crimes Specialist (ACFCS) West Africa Chapter, to talk about crypto and Travel Rule compliance throughout West Africa. Abraham will walk us through the current state of crypto in these countries and why Nigeria has such a high crypto adoption rate, how the Travel Rule is enforced, and what the future might look like for crypto companies in the region. 

Travel Rule and crypto in Nigeria & West Africa

THE SUMSUBER: Thank you so much for taking the time for this interview, Abraham. First of all, could you help us get acquainted with the current status of the Travel Rule in Nigeria and across West Africa? I understand it’s not yet in force formally.

ABRAHAM: So, ISA 2025 sets rules for the Travel Rule through SEC licensing and compliance with the Anti-Money Laundering Infrastructure Framework (AMLIF). However, there are currently no formal enforcement actions in place. In the Investment and Securities Act (ISA) 2025, the rules for Virtual Asset Service Providers (VASPs) also outline the Travel Rule compliance requirements via SEC licensing and AMLIF. Yet, there are no active enforcement measures or penalties established. This means that while the legal framework exists, actual enforcement may not be fully implemented. And this is not just the case in Africa, but rather a global pattern with the Travel Rule. When it comes to Nigeria, this can be found in the Rules on Issuance, Offering Platforms, and Custody of Digital Assets, in particular:

• Part D: Rules Pertaining to Virtual Asset Service Providers (VASPs) and 
• Part E: Guidelines for Digital Assets Exchanges (DAX).

These rules outline licensing requirements for VASPs under SEC oversight, AML/CFT/CPF obligations, as well as reporting and record-keeping standards for cross-border transactions.

THE SUMSUBER: Considering the rules that are in place, why has no West African country fully implemented the FATF Travel Rule yet? What regulatory or institutional gaps exist?

ABRAHAM: The major problem here is that West Africa has no regional directives yet, and national crypto/VASP laws are largely pending or non-existent. Nigeria, however, seems to lead the pack and has acknowledged the need through updated investment laws, but there’s a glaring gap between policy intention and operational enforcement. 

The region remains in the “sunrise phase” of implementation, struggling with resource constraints, fragmented crypto policy frameworks, and capacity issues within financial intelligence units (FIUs) and sector regulators. However, a coordinated push for legislative reform, reg-tech investment, and regional supervisory cooperation will be essential to move from FATF acknowledgement to genuine operationalization.

THE SUMSUBER: Now that we’re mentioning the FATF, can you explain how Nigeria’s new Travel Rule provisions (like the $1,000 threshold) compare to FATF expectations?

ABRAHAM: That’s a good question. I believe we are very much in alignment with the FATF-specified threshold, as Nigeria has expressed intent to adopt this threshold as part of its broader AML/CFT reforms, from my research, but no official gazette law or regulation explicitly specifying this threshold has been published yet. 

However, the FATF’s June 2025 update confirms that countries are expected to implement these standards by 2030, and Nigeria is still in the alignment phase.

THE SUMSUBER: In your view, do VASPs in Nigeria consider the Travel Rule relevant—given local market dynamics like the naira collapse and reliance on crypto?

ABRAHAM: Yes, I believe so. The Central Bank of Nigeria has a clear message for fintech and non-bank financial institutions: compliance is essential. The recent fines and penalties show that all industry players need to focus on following the rules. In Nigeria, factors like the decline of the naira and the use of cryptocurrency for payments and as a safeguard are becoming more common. As inflation and currency instability grow, many Nigerians are adopting crypto. This push for compliance with crypto regulations is crucial as Nigeria leads in crypto adoption in Africa.

However, most VASPs operating locally may not yet prioritize the FATF Travel Rule, since it’s often viewed as an externally imposed standard that clashes with local informal market dynamics and weak regulatory enforcement. Yet, failure to prepare for its enforcement could isolate Nigerian VASPs from global compliance networks and cross-border opportunities eventually, as the rest of the world moves on with Travel Rule compliance, which is essential for off-chain intelligence and Due Diligence.

THE SUMSUBER: Sounds like the Travel Rule will become quite important for African VASPs. Beyond the Travel Rule, how is crypto regulated in Nigeria, particularly under the SEC’s 2022 Digital Assets Rules and the updated 2025 Investments and Securities Act (ISA), which now formally categorize Bitcoin as a security?

ABRAHAM: Nigeria has adopted a multi-regulator approach to crypto oversight, led by the Securities and Exchange Commission (SEC), Central Bank of Nigeria (CBN), and the Nigerian Financial Intelligence Unit (NFIU). The 2022 SEC Rules on Digital Assets and the updated 2025 Investments and Securities Act (ISA) now formally categorize Bitcoin and other crypto assets as securities, subject to SEC jurisdiction. 

This evolving regime introduces regulatory certainty along with operational complexity for VASPs and financial institutions. However, Nigeria’s crypto regulatory architecture is maturing fast. I think it is high time we pivoted from piecemeal rules to a harmonized digital asset ecosystem that blends investor protection, innovation incentives, and AML/CFT safeguards. I also think regulatory tech adoption, data transparency, and regional collaboration will be critical levers for the next phase.

THE SUMSUBER: We previously mentioned issues with the naira in the local market affecting the view on crypto regulation. How do efforts to delist naira from P2P platforms or to enforce bank bans influence adoption and compliance dynamics?

ABRAHAM: Quite a sensitive question. I would say the Central Bank of Nigeria has tried to reduce speculation around the naira and to prevent regulatory loopholes. It has pressured P2P platforms to remove the naira and has banned banks from handling certain crypto transactions. Although these measures aim to stabilize the financial system, they can lead to problems: they may push transactions underground, weaken oversight, and create hidden risks due to a lack of visibility.

A better solution might be to fully use the eNaira as a central bank digital currency. By using the eNaira for all on-ramp and off-ramp transactions with virtual asset service providers, all transactions would be visible. This would help improve tax compliance and ensure effective transaction monitoring.

Travel Rule in context—South Africa’s experience

THE SUMSUBER: Let’s move on from Nigeria to the perspective of the countries that have managed to put these regulations into action. From what we’ve seen, South Africa has seen a good amount of success since enforcing the Travel Rule. Why do you think this is so?

ABRAHAM: While I am not much of an authority on South Africa’s AML policy stance, I think South Africa’s success with the Travel Rule stems from strong regulatory enforcement, greylist-driven reforms, and coordinated efforts among financial institutions. Clear guidelines under the FIC Act and proactive compliance by crypto firms may have helped ensure smooth implementation and positioned South Africa as a regional leader in AML/CFT standards.

Since having been greylisted in 2023, the country has fast-tracked reforms to improve AML/CFT controls, and I think Travel Rule enforcement is also a key part of this shift. This approach is one that other African nations would benefit from adopting.

THE SUMSUBER: In that light, what lessons from South Africa could Nigeria or other African countries adapt?

ABRAHAM: Generally, I think West African countries should get on board with crypto regulation and ride the waves of globalization on this subject. It should take inspiration from leading nations such as the EU and the US. You cannot keep ignoring crypto and allow underground economies in a critical sector like decentralized finance. 

I think Nigeria should also establish a regulator-VASP dialogue forum for co-development of enforceable guidelines, license, and register qualifying VASPs to improve oversight and enforcement, support onboarding Travel Rule infrastructure (like TRISA), and focus enforcement on cross-border and higher-risk VASPs. The GIABA leading this charge would help a lot. We should treat VASPs as fully accountable institutions and support them through clear laws, industry guidance, and supervisory engagement.

THE SUMSUBER: We know that Directive 9 requires CASPs in South Africa to collect and transmit originator and beneficiary data for all transactions. What are the operational challenges and privacy concerns entailed?

ABRAHAM: From my research, Directive 9 of South Africa’s Financial Intelligence Centre mandates all Crypto Asset Service Providers (or CASPs—a jurisdiction-specific term for what the FATF refers to as VASPs) to collect and transmit originator and beneficiary information for every crypto transaction, regardless of value. I sincerely think that this is over-ambitious and does not align with the risk-based approach principle for proportionality of controls to risk. 

The zero-threshold requirement is meant to help meet FATF’s Travel Rule and improve anti-money laundering AML/CFT efforts. However, it also creates challenges related to operations and privacy. These challenges include dealing with false alerts, managing alert fatigue, and questioning the reasons for collecting and analyzing data. While this rule helps make financial transactions more traceable, African regulators should find a balance between transparency and proportionality.

To avoid excessive compliance efforts, especially with high-volume microtransactions, regulators need to create policies that enable compliance teams to incorporate privacy protection and automation from the very beginning.

Broader crypto regulation across Africa

THE SUMSUBER: Let’s touch upon the topic of other African countries in terms of compliance for a moment. Could West African countries collaborate on a shared regulatory framework—perhaps modeled after the EU—to support Travel Rule readiness?

ABRAHAM: Yes, this would be nice. While such a framework hasn’t been implemented before, to the best of my knowledge, regional bodies like GIABA have always coordinated AML/CFT efforts. A unified approach would reduce regulatory fragmentation, promote cross-border compliance, and ease VASP onboarding.

Shared standards could also attract investment and foster innovation. With rising crypto adoption and FATF pressure, regional harmonization is both timely and feasible. Leveraging existing ECOWAS structures and RegTech partnerships could make this vision a reality by 2026, positioning West Africa as a leader in crypto regulation.

Risks & the road ahead

THE SUMSUBER: Let’s talk a bit more about the potential future of crypto regulation in Africa. What are the risks for African VASPs falling behind on Travel Rule compliance: bank de-risking, global sanctions, loss of correspondent banking?

ABRAHAM: Definitely, all of those. African VASPs lagging on Travel Rule compliance face serious risks like bank de-risking, loss of correspondent banking, and global sanctions that can isolate them from international financial systems. 

Additional risks include reputational damage, limited access to venture capital, exclusion from cross-border payment networks, and regulatory crackdowns. Non-compliance also hinders partnerships with compliant global platforms, stifles innovation, and may trigger domestic enforcement actions. As FATF deadlines approach, delayed adoption could leave African VASPs vulnerable, especially in competitive markets.

It is also crucial to implement systems and solutions that can facilitate faster regulatory compliance.

THE SUMSUBER: How viable do you think technical or interoperable solutions (blockchain, messaging standards) are for African VASPs with limited resources?

ABRAHAM: Okay, I am not much of an expert on this, but I think technical and interoperable solutions like blockchain protocols and messaging standards are viable but may be quite challenging for African VASPs with limited resources. Partnerships with RegTech firms and regional hubs could help bridge this gap affordably. Using Travel Rule solutions also helps automate and streamline the compliance process.

THE SUMSUBER: Speaking of these kinds of partnerships, could private sector initiatives or KYC providers help smaller platforms leap into compliance ahead of formal regulation?

ABRAHAM: Definitely. Private sector initiatives are needed to partner with public sector efforts. So much depends on the private sector, in fact. Private sector initiatives and KYC providers can help smaller platforms comply with the Travel Rule by offering plug-and-play solutions, shared infrastructure, and privacy-preserving technologies.

These tools can be maximized to reduce costs and remove complexity barriers, positioning platforms favorably ahead of formal regulation of crypto and further Travel Rule implementation.

THE SUMSUBER: It certainly seems viable. Looking to 2026 and beyond, how do you see Travel Rule adoption evolving across Africa? Which regions or countries are next in line?

ABRAHAM: I expect that by 2026, Travel Rule adoption in Africa will accelerate, led by Southern and East African countries like Kenya, Mauritius, and Rwanda. West Africa would progress gradually, with Nigeria and Ghana aligning frameworks, and, with FATF pressure, regional cooperation and RegTech innovation would most probably drive broader compliance across the continent.

THE SUMSUBER: Thank you for your great insights into the crypto landscape of Africa, Abraham. It was quite the eye-opener. For a final touch, if you could recommend three priority actions to Nigerian and West African policymakers to prepare for Travel Rule alignment and broader crypto oversight, what would they be?

ABRAHAM: Of course. We should create forums for regulators and VASPs to work together on clear guidelines. We need to license and register qualifying VASPs to improve oversight and enforcement. It’s important to support the setup of the Travel Rule infrastructure, like TRISA, and focus on enforcing rules for cross-border and higher-risk VASPs. If ECOWAS leads this effort, it will help significantly. We should treat VASPs as fully accountable institutions and support them with clear laws, industry guidance, and active supervision.