The news
- Nigeria is revising its digital asset regulations to include taxation of cryptocurrency transactions.
- In 2021, the Central Bank of Nigeria (CBN) prohibited financial institutions from facilitating cryptocurrency transactions before lifting the ban in 2023.
The Nigerian government is intensifying its efforts to regulate and tax cryptocurrency transactions, aiming to boost national revenue and exert greater oversight over the digital asset market.
This regulatory shift reflects the government’s recognition of the significant role cryptocurrencies play in Nigeria’s economy. Despite previous restrictions, Nigeria has consistently ranked among the top countries in cryptocurrency adoption, with a substantial portion of the population engaging in digital asset transactions.
The initial ban in 2021 was primarily driven by concerns over the opaque nature of cryptocurrencies and their potential use in illicit financial activities. The CBN emphasised the need to protect the financial system from risks associated with unregulated digital currencies.
However, the ban did not deter Nigerians from participating in the crypto market. Many turned to peer-to-peer platforms, leading to an increase in unofficial trading volumes. Recognizing the resilience of the crypto community and the potential economic benefits, the government reconsidered its stance.
The lifting of the ban in December 2023 marked a pivotal moment, transitioning from outright prohibition to regulation. The SEC’s subsequent guidelines provided a framework for banks to manage cryptocurrency accounts.
Taxation of digital assets was further solidified with the introduction of the Finance Bill 2022, which proposed bringing all sectors, including the crypto industry, into the tax net.
Following repeated calls from industry stakeholders, the SEC introduced a licensing framework for cryptocurrency startups, requiring virtual asset service providers (VASPs) to register and comply with stringent regulatory guidelines. Busha and Quidax received provisional licenses as a result.
While the policy aims to create a safer environment for crypto trading, industry players have argued that high compliance costs may stifle innovation and limit access for smaller startups.
In contrast, South Africa has taken a more structured and inclusive approach. The country’s Financial Sector Conduct Authority (FSCA) recognizes crypto asset service providers (CASPs) as financial institutions, allowing them to operate under a clear regulatory framework.
South African crypto firms benefit from a well-defined licensing process that balances consumer protection with business growth, making it a more attractive destination for cryptocurrency entrepreneurs compared to Nigeria’s evolving, and often uncertain, regulatory landscape.
