Nigeria's experiment with formally regulating cryptocurrency businesses has hit its first visible hurdle, with Quidax, a provisionally licensed digital asset exchange, shutting down its peer-to-peer (P2P) trading feature just five months after launching it.
The move comes as the Securities and Exchange Commission (SEC) tightened oversight of the crypto sector under its Accelerated Regulatory Incubation Program (ARIP), a sandbox designed to transition exchanges from the largely informal market into Nigeria's capital markets framework.
While Quidax framed the decision as a response to user preferences, the P2P exit highlights the practical limitations that regulators are currently prepared and able to observe.
Quidax informed customers via email that its P2P marketplace would be shut down, disabling advertising, merchant chat and escrow services, while other products such as instant swaps and order-book trading would continue to operate.
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A stress test for the sandbox
P2P trading has long been one of the most active and most controversial sectors of Nigeria's crypto economy. It enables users to buy and sell digital assets directly with each other, often settling transactions via bank transfer outside the exchange. That structure has made P2P platforms an important liquidity channel, but it has also become a frequent regulatory headache.
In 2024, the SEC publicly raised concerns about P2P crypto markets, pointing to opaque transaction flows, difficulties in monitoring off-platform settlements, and risks of exchange rate manipulation. The regulator also flagged the dominance of foreign P2P platforms operating in a legal gray area, complicating enforcement and investor protection.
Quidax's P2P feature was positioned as a corrective measure to those risks. Rather than allowing trades to spread across informal channels, the exchange attempted to internalize P2P activity in a controlled environment. Only verified users can become merchants, eligibility requires full account registration, Level-3 Know Your Customer verification, two-factor authentication and minimum participation history. Merchant applications were reviewed by Quidax, and approved merchants were issued special badges.
Despite those safeguards, the feature has now been shut down, showing that even tightly controlled P2P models may be beyond the regulator's current comfort zone.
License delays and increasing limits
The timing of Quidax's decision is important. Startups admitted to the SEC's ARIP program, including Quidax and competitor Busha, were expected to move to full crypto licenses by August 2025 after completing a one-year incubation period. The process has since been stalled, with the regulator putting licensing approval on hold to reassess its supervisory readiness.
At the same time, the demand for Nigeria's crypto rulebook is becoming greater. On January 16, the SEC increased the minimum capital requirements for capital-markets operators, including virtual asset service providers. Under the Investments and Securities Act (2025), digital assets are now classified as securities, bringing crypto activities firmly under capital-market regulation.
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While the SEC has not issued a standalone framework for P2P platforms, the classification regime provides guidance. A P2P service can be treated as a Digital Asset Intermediary (DAI) or a Digital Asset Platform Operator (DAPO), both of which now have a minimum capital requirement of N500 million ($352,000). Where services are stacked, combining P2P trading with exchange operations, custody or escrow further increases the regulatory burden.
For sandbox participants operating under close scrutiny, product complexity now carries regulatory risks.
What the sandbox allows and what it doesn't
Quidax's P2P exit also provides information on what Nigeria's crypto sandbox currently allows. Activities that reflect traditional capital-markets structures, such as order-book trading, centrally arranged swaps, and custodial services, appear to be easier for regulators to monitor.
In contrast, P2P trading raises concerns about informal settlements, limited transaction visibility, and investor protection. Even when conducted on the platform, much of the actual value transfer occurs outside the direct control of the exchange, complicating supervision.
In that sense, the Quidax decision marks the first clear limitation of the sandbox: innovations that cannot be neatly mapped onto the existing regulatory framework are likely to be postponed.
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comprehensive return to risk
The P2P shutdown also coincides with a broader crackdown on Quidax's platform. The exchange has announced plans to delist 35 crypto tokens, including meme coins, gaming tokens, and high-profile assets like WorldCoin and World Liberty Financial.
Overall, these moves point to a strategic recalibration as Nigeria's regulatory environment tightens. For exchanges seeking full licensing, reducing the risk of high-risk or difficult-to-monitor activities may now be a prerequisite for survival.
Nigeria's Crypto Sandbox was designed to balance innovation with investor protection. Quidax's P2P exit shows that balance is being tested and, for the time being, the regulator is prioritizing visibility, control and capital adequacy over the most informal trading structures of the market.
