Nigeria is in the process of amending its regulations to permit the taxation of cryptocurrency trading and digitized transactions as part of its strategy to enhance national revenue. The Securities and Exchange Commission (SEC) is currently developing new rules aimed at ensuring that all eligible transactions conducted on regulated exchanges are included in the formal tax framework.
In 2021, the Central Bank of Nigeria (CBN) imposed a ban on financial institutions from facilitating cryptocurrency transactions, citing concerns over the lack of transparency associated with digital currencies and their potential use in illegal financial activities. However, this ban was lifted in December 2023, signaling a significant shift in the government’s approach to cryptocurrency regulation.
The Nigerian government is intensifying its efforts to regulate and tax cryptocurrency transactions, recognizing the growing importance of digital assets in the country’s economy. Despite the previous restrictions, Nigeria has consistently ranked among the top nations in terms of cryptocurrency adoption, with a considerable segment of the population actively engaging in digital asset transactions.
The initial ban was primarily motivated by the need to safeguard the financial system from the risks posed by unregulated digital currencies. The CBN emphasized the importance of protecting the financial sector from potential threats linked to cryptocurrencies. However, the ban did not deter Nigerians from participating in the crypto market; many individuals turned to peer-to-peer platforms, resulting in a rise in unofficial trading volumes. Acknowledging the resilience of the crypto community and the potential economic advantages, the government began to reconsider its position.
The lifting of the ban marked a pivotal moment for Nigeria, transitioning from outright prohibition to a regulatory framework. Following this change, the SEC introduced guidelines that provided banks with a framework for managing cryptocurrency accounts. The taxation of digital assets was further reinforced with the introduction of the Finance Bill 2022, which proposed to include all sectors, including the cryptocurrency industry, within the tax net.
In response to ongoing requests from industry stakeholders, the SEC has also established a licensing framework for cryptocurrency startups. This framework mandates that virtual asset service providers (VASPs) register and adhere to stringent regulatory guidelines. As a result, companies like Busha and Quidax have received provisional licenses to operate.
While these policies aim to create a safer environment for cryptocurrency trading, industry participants have raised concerns that the high compliance costs associated with these regulations may hinder innovation and limit access for smaller startups.
In contrast, South Africa has adopted a more structured and inclusive approach to cryptocurrency regulation. The Financial Sector Conduct Authority (FSCA) in South Africa recognizes crypto asset service providers (CASPs) as financial institutions, allowing them to operate under a clear regulatory framework. This well-defined licensing process in South Africa 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.
