The Nigerian government is drafting an executive bill to overhaul revenue administration, including regulating the cryptocurrency industry.
This move follows a series of crackdowns on the crypto sector in 2024, despite the lifting of a ban on official crypto transactions in December 2023. Throughout the year, the government targeted crypto operators, blaming them for the naira’s volatility, tax evasion, and terrorism financing.
However, Zacch Adedeji, chairman of the Federal Inland Revenue Service (FIRS), revealed over the weekend that an executive bill is being prepared for transmission to the National Assembly. The bill seeks to modernise revenue administration, including establishing a legal framework for crypto regulation.
Adedeji, in a statement released by Dare Adekanmbi, his special adviser on media, acknowledged the inevitability of engaging with the crypto ecosystem. “We cannot run away from the cryptocurrency ecosystem because it is the in-thing. But as it stands in Nigeria today, there is no law that regulates cryptocurrency operations.
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“We need a law that regulates that area of our economy. This is why we are having this engagement with the legislators. We will regulate it in a way that is not injurious to the economic development of Nigeria.”
The crypto regulation will form part of the country’s revenue collection overhaul attempt to reduce dependence on oil revenues. The new executive seeks to address gaps in existing revenue laws.
“Part of what we intend to achieve with this is to harmonise revenue collection, making tax laws very simple to understand and to be in tune with our current realities. For example, the Stamp Duty Act was made in 1939 when there was no internet connectivity… So, we need to bring that law up to date,” the FIRS boss emphasised.
This development follows moves by some crypto operators to collect Value-Added Tax on transaction fees. In July, KuCoin, a crypto platform, told customers it would begin charging a 7.5 percent VAT on all transaction fees in the country.
KuCoin said, “Starting from July 8th, 2024, we will begin collecting a Value-Added Tax (VAT) at a rate of 7.5 percent on transaction fees in each trade for users whose KYC information is registered in Nigeria.
“Transaction: Buy 1,000 USDT worth of BTC. Fee: 1 USDT (0.1 percent fee rate). Tax: 0.075 USDT (7.5 percent of the fee). Net Amount for Transaction: 998.925 USDT.”
Chimezie Chuta, founder and coordinator of Blockchain Nigeria User Group, noted that the government cannot collect tax from an unregulated entity, suggesting that formal regulation is imminent. “They cannot collect tax from an unlicensed entity,” he said.
Nigeria is one of the largest peer-to-peer (P2P) crypto markets globally. According to Chainalysis, a global blockchain platform, crypto transactions in the country totalled $56.7 billion between July 2022 and June 2023.
Emomotimi Agama, director-general of the Securities and Exchange Commission (SEC), recently asserted, “Reports indicate that Nigeria’s crypto transaction volume reached $56.7 billion between July 2022 and June 2023, representing a nine percent year-over-year growth.”
In 2022, Nigeria attempted to tax crypto through the Finance Act of 2022, imposing a 10 percent tax on profits from digital assets, including cryptocurrencies.
“Subject to any exceptions provided by this Act, all forms of property shall be assets for this Act, whether situated in Nigeria or not, including options, debts, digital assets, and incorporeal property generally.” However, this provision was never enforced.
The Securities and Exchange Commission (SEC) has been leading efforts to establish a regulatory framework for the crypto industry, particularly after the Central Bank of Nigeria (CBN) lifted its ban in December 2023 and handed regulatory oversight to the SEC.
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The commission recently revealed that it would monitor the weekly and monthly trading statistics of Virtual Assets Service Providers (VASPs) such as crypto automated teller machines (ATMs), exchanges, P2P platforms, and custodians.
This initiative was detailed in the recently released document by SEC entitled, ‘A Framework on Accelerated Regulatory Incubation Program for the Onboarding of Virtual Assets Service Providers (VASPs) and other Digital Investments Service Providers (DISPs).’
SEC has been amending its rules on digital asset issuance, offering platforms, exchanges, and custodies to adapt to the evolving crypto ecosystem. Earlier in July, Wale Edun, minister of finance and coordinating minister of the economy had tasked the newly inaugurated SEC board with addressing the complexities of crypto regulation. “The SEC board should be willing to accept the challenge of regulating these new areas, particularly crypto, as they are fast-moving complex areas,” he said.
Senator Ihenyen, lead partner and head of blockchain and virtual assets practice at Infusion Lawyers, stated, “Nigeria can no longer afford to keep pushing digital assets underground for obvious economic and security reasons. Our regulators will now work together to ensure consumer protection and investor safety.”
