Nigeria Crypto: SEC Regulation & Adoption #31

Country facts

Nigeria crypto score

Trade and store crypto

Top global adoption, SEC licensing, and high P2P trading volumes

Nigeria has had a booming crypto population despite mainstream banks being prohibited from trading in cryptocurrency, but this may be tailing away. As with many countries where crypto is unregulated, the Nigerian crypto economy becomes unbalanced between popular demand and control of events. The Central Bank of Nigeria states that virtual currencies issued by unregulated and unlicensed entities run contrary to its mandate. The Securities and Exchange Commission (SEC) which also oversees transactions in digital assets requires crypto participants to operate only from bank accounts within the Nigerian banking system. Nigeria has healthy scores for crypto searching, number of exchanges, and crypto ownership, but the all-around crypto infrastructure lacks cohesion.

Towards the end of 2022, Nigeria has visibly softened its stance toward cryptocurrencies and trading exchanges and is now assessing the regulation of crypto to keep abreast of regulatory changes occurring all around the world – especially those in wake of the FTX collapse. From banned crypto trading – which proved ineffectual – the country sees regulation as a better means to control the country’s population’s huge appetite for crypto. Reports suggest that the country is in talks with Binance as an approved crypto exchange to take its place as part of a revitalized crypto and blockchain-friendly economy within the country.

Bitcoin  in Nigeria

Following a pattern of many small countries that see crypto as a financial opportunity to take a lead, Nigeria has opened up its system to huge volumes of peer-to-peer crypto transacting. According to one report, it had the highest proportion of residents using cryptocurrency than anywhere in the world – with very high trading volumes. However, the government is struggling to clarify its position on runaway crypto adoption and even controversially advised its banks to ban their crypto activity.

Spend

Nigeria is more about using crypto for transactions, becoming a kind of surrogate banking service in a country that bypasses high transfer charges. Many world brands operating in Nigeria accept bitcoin, amongst them, Microsoft.

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Gifting Crypto

There appears to be no tax on trading or gifting crypto. Situations may differ between jurisdictions across the country.

Bitcoin trading and crypto law in Nigeria

Way back, in an effort to regulate the runaway interest in crypto, the central bank tried to restrict banks from facilitating crypto, but this attempt went largely ignored. Although bitcoin and other crypto coins are not considered legal tender or fiat currencies, as issued by banks, there is a growing level of acceptance generally. Lately, the central bank has again tried to curb the crypto craze and the result was many frozen bank accounts and customers bypassing banks by using online trading systems. On the whole, the government wants to capture crypto potential and is looking for a more cohesive strategy or rules and regulations.

Legal Latest

A consolidated crypto strategy is very much needed and is being continually advocated at all levels. A pilot scheme is currently underway to run a government-backed digital currency to bring onside all those who distrust banks and financial institutions and turn instead to unregulated cryptocurrency trading. Nigeria’s Securities Exchange Commission issued regulatory guidelines in 2020 but this is merely a clarification of how the regulator intends to view crypto assets going forward. Nevertheless, the guidelines are seen by many to be a step in the right direction.

Bitcoin tax in Nigeria

Tax

Nigeria has a less-onerous tax regime than many countries and the rates of taxation are not high. There appears to be no taxation of crypto gains within the standard income tax requirements. As yet, the vast volume of crypto activity in Nigeria is centered around peer-to-peer transactions – a form of surrogate banking rather than profiting from gains. Taxation and regulation in Nigeria are awaiting a clearer strategy.

Tax Relief

No tax on crypto would appear to be relief enough.

Tax when moving residency

Whether crypto gains or any other profit, moving to become a resident of another country would require adherence to that country’s tax laws.

Tax for Mining

Mining is beyond the scope of most individuals and calls for significant investment in time, money, and equipment. With no tax to pay on crypto, there would seem to be no tax on mining.

Crypto financial services in Nigeria

Fin services/retirement account

Most retirement and pension funds worldwide deem cryptocurrencies to be too volatile to become part of long-term retirement schemes. There is little certainty on this at present.

Fin services/Banking interest

Banks and banking are very much viewed with some suspicion or at least disdain by the majority of Nigeria’s population, especially among the poor. Banks have yet to be able to play a part in the development of crypto in Nigeria, rather they are being bypassed by peer-to-peer transactions of crypto through online platforms. A government lead may bring banks back into favor.

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Fin Services/Defi

Decentralized Finance is behind the rapid interest and growth of cryptocurrency and is underpinned by blockchain technology. As yet Nigerian financial institutions are lagging in their consolidation of this new technology.

Crypto regulation in Nigeria

Security

It’s always a good idea to check the levels of security, protection and insurance of any crypto service provider, including exchanges and wallets. Nigerian-based exchanges may offer more recourse to action if things go wrong, and a more immediate level of customer support, whilst overseas-based exchanges can provide a wider choice of services and perhaps greater speeds of affiliation and transaction.

Transparency

Transacting crypto online requires personal details and proof of ID – so you can forget about the myth of anonymity that surrounds bitcoin and other crypto.