Abdul Muhammed Law Practice
Abdul Muhammed Law Practice provides a short overview of the legal, regulatory and business state of cryptocurrency in Nigeria today.
Introduction
In 2009, global governments began shaping regulations to combat fraud in the realm of blockchain and digital assets, a trend mirrored in Nigeria, Africa’s most populous nation.
The country witnessed a surge in cryptocurrency interest, notably during the 2022 market crash, with Nigeria emerging as one of the most crypto-curious nations.
This curiosity, fueled by factors like limited financial services, high inflation, and a tech-savvy youth demographic, led to the country becoming a significant player in global crypto adoption.
CBN ban
Despite the Central Bank of Nigeria (CBN) not recognizing cryptocurrencies as legal tender and imposing a ban on banks engaging in crypto transactions, the digital assets market in Nigeria continued to thrive.
The ban aimed to shield citizens from illicit activities but acknowledged the potential of cryptocurrencies for financial inclusion. Consequently, while not illegal, cryptocurrencies operate independently of the country’s banking sector, resulting in the rise of peer-to-peer trading.
SEC
In response to this regulatory gap, the Securities and Exchange Commission (SEC) of Nigeria stepped in, publishing a detailed document in May 2022 outlining rules for digital assets. Crypto exchanges operating in Nigeria are now required to obtain a permit from the SEC, adhering to regulations that include securing a virtual asset service provider (VASP) license, maintaining a substantial paid-up capital, and implementing security measures to mitigate cyber risks.
Naira issues
The challenge of converting cryptocurrencies to local currency persists due to the banking sector’s detachment from crypto transactions.
Nevertheless, innovative solutions like the Breet App have emerged, enabling direct conversion to naira. Taxation on cryptocurrencies is still evolving, with the Federal Inland Revenue Service considering them taxable as capital gains pending the approval of a proposed Finance Bill.
Looking ahead
Looking ahead, Nigeria’s cryptocurrency landscape is poised for growth, with trends pointing toward increased adoption for both retail trade and cross-border payments.
Cryptocurrencies are seen not only as a store of wealth amid economic uncertainties but also as a legitimate medium for payments, trade, and investments, especially with regulatory bodies taking a proactive stance. As the nation navigates this evolving terrain, the future holds promise for cryptocurrency to become an integral part of the financial fabric for the average Nigerian citizen.
READ: Global view of cryptocurrency consumer protection
