Nigeria to Tax Crypto Transactions Amidst Stricter Regulations
The Nigerian government is working harder to tax and regulate cryptocurrency transactions in an effort to increase national revenue and exercise more control over the market for digital assets.
This change in regulations is a result of the government’s realization of how important cryptocurrencies are to Nigeria’s economy. Nigeria, where a sizable section of the populace transacts in digital assets, has continuously been among the top nations in cryptocurrency adoption, despite earlier limitations.
Fears about cryptocurrency’s opaqueness and possible use in illegal financial operations were the main reasons for the first prohibition in 2021. Protecting the financial system from the dangers of unregulated digital currencies was emphasized by the CBN.
Nigerians continued to participate in the cryptocurrency market despite the ban. Peer-to-peer platforms became popular, which increased the volume of unofficial transactions. The government changed its position after realizing the crypto community’s tenacity and the possible financial gains.
An important turning point was reached in December 2023 when the ban was lifted, moving from complete prohibition to regulation. Subsequent rules issued by the SEC gave banks a structure for handling bitcoin accounts.
When the Finance Bill 2022 was introduced, it intended to include the cryptocurrency business and all other industries in the tax system, thus solidifying the taxation of digital assets.
Virtual asset service providers (VASPs) must register and adhere to strict regulatory rules as part of the SEC’s licensing framework for cryptocurrency businesses, which was implemented in response to repeated requests from industry stakeholders. The result was provisional licenses for Busha and Quidax.
South Africa, on the other hand, has adopted a more organized and inclusive strategy. Crypto asset service providers (CASPs) are permitted to function under a clear regulatory framework since they are recognized as financial institutions by the nation’s Financial Sector Conduct Authority (FSCA).
Compared to Nigeria’s changing and frequently unpredictable regulatory environment, South Africa is a more alluring location for cryptocurrency businesses due to its clear licensing process that strikes a balance between consumer protection and corporate expansion.
