Since the emergence of Bitcoin in 2009, cryptocurrencies have seen interesting changes in every case. Governments around the world understand the importance of digital assets and want to enact rules, policies, and regulations for the blockchain and cryptocurrency space. Nigeria, the most populous country in Africa, is not far behind! The country’s tech-savvy and blockchain-supportive youth are eager to adopt cryptocurrencies, so the country is keen to outline a framework for managing virtual assets.
In this module on Coinpedia, we discuss Cryptocurrency 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 trading in cryptocurrencies in 2021. Nigeria’s financial system and banking sector are not involved in cryptocurrency trading. However, they recognize the potential of digital assets and believe that this is where they can improve financial inclusion. Cryptocurrency is not illegal in Nigeria! There are currently no laws or bills criminalizing the use of cryptocurrency. Cryptocurrencies are widely traded on cryptocurrency exchanges across Nigeria.
Cryptocurrency Regulations in Nigeria
The CBN’s 2021 cryptocurrency ban and the growing popularity of digital assets in the country have prompted the Nigerian Securities and Exchange Commission to form a framework for cryptocurrency regulation in Nigeria. In 2022, the SEC published a comprehensive 54-page document titled “New Rules for Issuance, Offering Platforms, and Custody of Digital Assets” on its website.
- This document provides guidance to banks and financial institutions in the country on how to interact with digital assets.
- It clearly defines digital assets in Nigeria and reiterates that all digital asset token offerings, ICOs and blockchain-based offerings within Nigeria or by Nigerian issuers are subject to regulation by the SEC.
- All cryptocurrency exchanges offering services in Nigeria must secure a license, which gives the SEC full access to records.
- DAX is required to obtain a Virtual Asset Service Provider (VASP) license from the SEC, subject to application processing, registration fees, and other applicable fee requirements.
- Cryptocurrency exchanges must provide evidence of a minimum paid-up capital of 500 million Naira and a current bond amounting to 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) of cryptocurrency company owners, verify the identity of customers, comply with KYC and AML measures, and produce white papers. You must submit it. Submit documents to the SEC for approval when issuing tokens!
- Exchanges must also have a physical presence in Nigeria to ensure that they operate within the regulatory scope of the Nigerian authorities.
- Licensed DAXs must comply with SEC regulations and submit commitments to appoint a Chief Information Security Officer to ensure availability of records, ensure personnel and resource availability, security measures and risk management, and mitigate cyber risks.
- In 2023, the Central Bank of Nigeria realized the importance of cryptocurrencies and lifted the ban on cryptocurrency trading.
What’s new in Nigeria cryptocurrency regulation in 2024?
The Binance controversy has prompted the government to increase enthusiasm for exchanges operating in the country. Binance was accused of financing terrorism, which led to its partial expulsion from the Nigerian cryptocurrency market. On March 7, 2024, the SEC will incorporate revised guidance for the licensing and registration of virtual asset service providers operating in the region.
- These guidelines include anti-money laundering measures and anti-terrorist financing measures.
- Recent troubles with the country’s fiat currency, the Naira, have led the government to resort to the traditional approach of restricting investors’ access to cryptocurrency services, looking for scapegoats for its rapid decline.
- On March 7, the SEC updated its guidance to post government blocks for cryptocurrency service providers to allow locals to access several cryptocurrency platforms, such as Binance.
- The new SEC guidelines ensure that “criminals are not registered as operators” in the capital markets.
taxation
Cryptocurrencies are taxable in Nigeria! Certain legislation was signed into law by then-President Buhari in May 2023 to sort out the tax status of digital assets in the evolving cryptocurrency space. The new law imposes a 10% tax on the disposal of all digital assets, including cryptocurrencies. This tax applies to both individuals and businesses or any type of entity residing in Nigeria. In May 2023, a 10% tax on profits from the disposal of cryptocurrencies was introduced.
Chainalytic, a New York-based blockchain research firm, announced that cryptocurrency trading volume in Nigeria reached $56.7 billion between July 2022 and June 2023, up 9% year-on-year. This growth is something that Nigeria needs to keep in check with cryptocurrency enthusiasts.