Since Bitcoin’s arrival in 2009, Cryptocurrency has seen an interesting shift in every case. Governments worldwide have understood the importance of digital assets and want to formulate rules, policies and regulations dedicated to the blockchain and crypto space. Africa’s most populous country, Nigeria, is not far behind! The country’s tech-savvy and pro-blockchain youth are eager to adopt crypto, which is why the country is in the process of laying out the framework for controlling virtual assets.
In this module by Coinpedia, we will discuss the crypto regulations in Nigeria in 2024! Let’s dive in.
Is Bitcoin legal in Nigeria?
Cryptocurrencies are not legal tender in Nigeria as they are not recognized by the Central Bank of Nigeria (CBN). The CBN has completely banned commercial banks from engaging in any crypto transactions in 2021. The financial system and banking sector of Nigeria is not linked to crypto trading. However, they recognize the potential of digital assets and believe they can improve financial inclusion here. Crypto is not illegal in Nigeria! There are currently no laws or legislation criminalizing the use of crypto. Cryptocurrencies are widely traded on crypto exchanges across Nigeria.
Crypto regulations in Nigeria
CBN’s ban on crypto in 2021 and the growing popularity of digital assets in the country has led the Securities and Exchange Commission of Nigeria to form a framework on crypto regulation in Nigeria. In 2022, the SEC published a comprehensive 54-page document titled “New Rules on Issuing, Offering Platforms and Custody of Digital Assets” on its website.
The document provides guidelines for banking and financial institutions of the country on how to deal with digital assets. It clarifies and defines digital assets in Nigeria and reiterates that all digital asset token offerings, ICOs and blockchain-based offerings within Nigeria or by Nigeria issuers will be regulated by the SEC. All crypto exchanges that provide services in Nigeria are required to obtain a permit, which gives the SEC all access to their records. The DAXes must obtain a virtual asset service provider (VASP) license from the SEC by meeting the requirements of application processing, registration fee and other applicable fees. Crypto exchanges must provide proof of a minimum paid-up capital of 500 million Nairas and a current fidelity bond covering at least 25% of the company’s minimum paid-up capital. They must obtain a license from the SEC and register with the Corporate Affairs Commission (CAC), collect the bank verification number (BVN) from crypto company owners, verify the identities of customers, comply with KYC and AML measures, and a white paper to the SEC for approval as token issue! Exchanges must also have a physical presence in Nigeria to ensure that they operate within the regulatory purview of Nigerian authorities. A licensed DAX must adhere to SEC regulations and submit an undertaking to ensure the availability of records, ensure staff and resource availability, security measures and risk management, and appoint a chief information security officer to mitigate cyber risks. In 2023, Nigeria’s central bank lifted a ban on the transaction of crypto, realizing the importance of crypto.
What’s New in Crypto Regulations in Nigeria in 2024?
The Binance controversy has led to the government turning up the heat on exchanges operating in the country. Binance was accused of terror financing which led to its partial exit from the Nigerian crypto market. On March 7, 2024, the SEC will integrate revised guidelines for licensing and registration of virtual asset service providers operating in the region.
These guidelines include measures against money laundering and combating the financing of terrorism. The recent aftermath of problems for the local fiat currency, Naira, has seen the government resort to its old ways of restricting investor access to crypto services in its quest to scapegoat it for its rapid decline. On March 7, the SEC updated its guidelines for crypto service providers following the government’s block on local access to various crypto platforms such as Binance. The new SEC guidelines will ensure that “criminals are not registered as operators” in the capital market.
Taxation
Crypto is taxable in Nigeria! A specific bill was signed into law by then President Buhari in May 2023 to clarify the tax status of digital assets in the developing crypto space. The new law imposes a 10% levy on the disposal of all digital assets, including cryptocurrency. The tax applies to both individuals and businesses or any type of entity residing in Nigeria. In May 2023, 10% tax on profits from the sale of crypto was introduced.
New York-based blockchain research firm, Chainalysis, published that the volume of crypto transactions in Nigeria grew by 9% year-on-year to $56.7 billion between July 2022 and June 2023. The growth shows that Nigeria is a market full of crypto -enthusiasts have and so it must be well regulated.
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!
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