Crypto Regulation In Nigeria 2024

Since Bitcoin‘s advent in 2009, cryptocurrency has been noticing an interesting shift at every instance. Governments across the world have understood the importance of digital assets and wish to formulate rules, policies and regulations dedicated to the blockchain and crypto space. Africa’s most populous country, Nigeria, is not behind! It is estimated that over 22 million people, that is, 10.3% of Nigeria’s total population, currently own digital currencies.

The country’s tech-savvy and pro-blockchain youth is eager to adopt crypto, hence the country is all into outlining the framework for governing virtual assets.

In this report by Coinpedia, we will discuss the crypto regulations in Nigeria in 2024! Let us dive in.

Crypto Adoption In Nigeria

The government lifted its ban on crypto in December 2023 in Nigeria. Crypto had a difficult history in Nigeria but the sector is shaking off its association with scams and is on a path towards being a regulated element of the financial sector. Nigeria had the highest proportion of crypto users in the world, with 32% of the respondents saying they used or owned crypto. From July 2022 to June 2023, Nigeria witnessed a 9% year-over-year growth in crypto transactions, amounting to $56.7 billion. 

The factors which contributed to the increasing popularity and adoption of crypto in Nigeria. Some of the most important ones are the need for a hedge against inflation and currency devaluation, the need for financial inclusion and empowerment, and the need for privacy. Nigeria’s crypto adoption is a phenomenon that reflects the country’s economic and social realities as these currencies have provided Nigerians with a new way of dealing with their challenges. 

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 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 acknowledge the potential of digital assets and believe that they could 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 The Region

Central Bank of Nigeria‘s ban on crypto in 2021 and the growing popularity of digital assets in the country led the Securities and Exchange Commission of Nigeria to form a framework for crypto regulation in Nigeria. In 2022, The SEC published a comprehensive 54-page long document titled “New Rules on Issuance, Offering Platforms and Custody of Digital Assets” on its website.

• The document offers guidelines for banking and financial institutions of the country on how to interact with digital assets.
• It clarifies and defines digital assets in Nigeria and iterates 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 providing services in Nigeria are required to secure a permit, which gives the SEC all the access to their records.
• The DAXs need to obtain a virtual asset service provider (VASP) license from the SEC by complying with the requirements of application processing, registration fee and other applicable fees.
• Crypto exchanges need to provide evidence 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 need to obtain a license from the SEC and register with the Corporate Affairs Commission (CAC), collect the bank verification number (BVN) of crypto company owners, verify the identities of customers, comply with KYC and AML measures, and submit a white paper to the SEC for approval if issuing tokens!
• Exchanges also need to have a physical presence in Nigeria to ensure that they operate within the regulatory purview of Nigerian authorities.
• A licensed DAX needs to abide by SEC regulations and submit an undertaking to ensure the availability of records, ensure personnel and resources availability, security measures, and risk management, and appoint a chief information security officer in order to mitigate cyber risks.
• In 2023, Nigeria’s Central bank lifted a ban on transacting crypto, realizing the importance of crypto.

What’s new in crypto regulations in Nigeria in 2024?

The Binance controversy led to the government turning up the heat on exchanges operating in the country. Binance was accused of terror financing leading to its partial exit from the Nigerian crypto market. On March 7, 2024, the SEC will be integrating revised guidelines for licensing and registering virtual asset service providers operating in the region. 

• These guidelines include measures against money laundering and combating financing of terrorism.
• The recent wake of troubles for the local fiat currency, Naira, made the government resort to its old ways of restricting investor access to crypto services in its pursuit of a scapegoat for its rapid decline.
• On March 7, the SEC updated its guidelines for crypto service providers post the government’s block to access several crypto platforms like Binance by the locals.
• The new SEC guidelines would ensure “criminals are not registered as operators” in the capital market.

Also Read : Binance Executive Takes Legal Stand Against Nigerian Government

Taxation

Crypto is taxable in Nigeria! A specific bill was signed into law in May 2023 by then-president Buhari to clear up the tax status of digital assets in the evolving 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 entities resident in Nigeria. In May 2023, 10% taxation on gains from the disposal of crypto was introduced. 

Legal Status Overview

Nigeria’s central bank has released inaugural guidelines for banks opening crypto accounts, while retaining its ban on them holding or trading in virtual assets on their own behalf. Nigeria has one of the highest crypto usage in the world. Let us have a look at what works in Nigeria:

Bitcoin	Not a legal tender
NFTs	Legal
Mining	Legal
Trading	Legal
DeFi	Legal

Future Prospects and Challenges

After the Binance mess, Nigeria has raised questions on crypto usage and operations. According to Reuters, crypto transactions equivalent to about 12% of Nigeria’s total income, or GDP, took place in June 2023. Cryptocurrencies are not illegal in Nigeria but firms must register to operate here. While Nigeria has shown extensive grassroots adoption of P2P crypto markets and a great social acceptance of crypto, it still lies behind in terms of on-off crypto ramps, crypto retail trading, and DeFi. Nigerians have turned to Bitcoin and other currencies for investments owing to the depreciation in naira’s value.

New York-based blockchain research firm, Chainalysis, published that the volume of crypto transactions in Nigeria grew 9% year-over-year to $56.7 billion between July 2022 and June 2023. The growth showcases that Nigeria has a market full of crypto enthusiasts and thus it needs to be regulated well. 

All in All

So, Nigeria is emerging as a major player in the global crypto scene. With a booming youth population eager to adopt new technologies and a government cautiously embracing regulation, Nigeria is poised to become a leader in shaping the future of crypto in Africa. However, challenges remain, from ensuring clear and consistent regulations to fostering a safe and secure environment for all participants.

Will Nigeria be able to navigate these hurdles and unlock the full potential of crypto? Only time will tell, but one thing’s for sure: Nigeria’s crypto journey is one to watch.