Effect of Quality Regulatory Framework on Prevalence of Cryptocurrency-Related Financial Crimes in Nigeria

Abstract

The paper examined the effect of quality regulatory framework on perceived prevalence of cryptocurrency-related financial crimes in Nigeria. Employing mixed methods approach with survey data from 385 respondents and thematic analysis of 15 regulatory documents and 8 expert interviews, the study utilized descriptive and Ordinary Least Square (OLS) regression analysis. Diagnostic tests confirmed no serious multicollinearity (VIF < 5), heteroscedasticity (Breusch Pagan p > 0.05), and normality of residuals (Jarque Bera p > 0.05). The results revealed a significant relationship from improved monitoring tools (RUMT, β = 0.0939, p < 0.01) and blockchain compliance mechanisms (BCAC, β = 0.0960, p < 0.01) to the perceived prevalence of financial crimes thereby indicating rise in financial crimes and by exposing previously hidden irregularities. In addition, regulatory guidelines exhibit a weak deterrent effect (RAGC, β = -0.0412, p < 0.10), attributable to weak enforcement by agencies responsible for implementation (e.g., EFCC, NPF), lack of clarity in guidelines issued by the CBN and SEC, and fragmented institutional structures on AML/CFT (despite CBN and SEC being the guideline issuers, enforcement lags due to poor coordination among regulators and law enforcement). Customer Due Diligence Verification (CDDV) was statistically insignificant, indicating that traditional KYC/AML mechanisms are insufficient against sophisticated crypto-related activities involving mixers, decentralized finance platforms, and offshore exchanges. However, Culture of Compliance (CCUL, β = 0.0531, p < 0.05) and geopolitical zone (β = -0.0341, p < 0.05) also significantly shape perceptions. The findings suggest that Nigeria remains in an awareness stage of regulation defined as a phase where detection and monitoring capabilities improve (evidenced by positive coefficients for RUMT and BCAC) but enforcement mechanisms lag behind, allowing crimes to be identified more readily without commensurate reduction. Law enforcement agencies such as EFCC and NPF should prioritize strengthening enforcement capacity and adopting advanced blockchain analytics as the first step; policymakers (National Assembly, CBN, SEC) should ensure regulatory frameworks are clear and comprehensive, thereby reducing ambiguity and institutional fragmentation among CBN, CAC, NFIU, and others.