Nigeria is overhauling its digital asset regulations to include taxation of cryptocurrency transactions, marking a significant shift in the government’s approach to the digital asset market.
The Central Bank of Nigeria (CBN) initially prohibited financial institutions from facilitating cryptocurrency transactions in 2021, but lifted the ban in 2023.
The Nigerian government aims to boost national revenue and exert greater oversight over the digital asset market through this regulatory revision.
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 driven by concerns over the opaque nature of cryptocurrencies and their potential use in illicit financial activities.
However, the ban did not deter Nigerians from participating in the crypto market, with many turning 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 Securities and Exchange Commission (SEC) subsequently provided guidelines for banks to manage cryptocurrency accounts, and the Finance Bill 2022 proposed bringing all sectors, including the crypto industry, into the tax net.
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, recognizing crypto asset service providers (CASPs) as financial institutions and providing a clear regulatory framework.
This has made South Africa a more attractive destination for cryptocurrency entrepreneurs compared to Nigeria’s evolving regulatory landscape.
