Nigeria reverses crypto ban, eyes tax revenue opportunities
…Stakeholders applaud regulation as potential catalyst for Govt tax revenue industry growth
The Central Bank of Nigeria (CBN) has rescinded its previous ban on cryptocurrency transactions. This development emerged from a circular issued on December 22, 2023, signaling a new era for the country’s digital currency landscape.
The initial prohibition, which directed banks to cease dealings with cryptocurrency entities, was imposed in 2021 amidst concerns over money laundering and terrorism financing.
However, the CBN’s latest directive, referenced FPR/DIR/PUB/CIR/002/003 and signed by Haruna Mustafa, the Director of Financial Policy and Regulation Department, encourages banks to re-engage with virtual asset service providers (VASPs).
The circular, entitled ‘Circular to all banks and other Financial Institutions guidelines on operations of bank accounts for Virtual Assets Service Providers,’ acknowledges the evolving global trends and the need for Nigeria to adapt. It revises the CBN’s stance, taking into account the Securities and Exchange Commission’s rules from May 2022, which established a regulatory framework for digital assets and VASPs in Nigeria.
Stakeholders in the crypto ecosystem have welcomed the move, anticipating that the regulation of cryptocurrencies will unlock new tax revenue streams for the government. They believed that this regulatory clarity could pave the way for increased investment and innovation in the sector.
The CBN has clarified that the new guidelines supersede previous directives from 2017 and 2021, setting a fresh course for the operation of bank accounts by VASPs.
The Founder and Coordinator of the Blockchain Nigeria User Group, Chimezie Chuta, believes that this move is a positive step for the industry and the economy.
He stated, “Even though this is late, we think it is a step in the right direction as an industry. It is also good for the economy because now that there would be regulation, it means that government will be able to tax it and regulators and policy makers will be able to take pride in the fact that they have taken a step in the right direction.”
The new guidelines set by the CBN have specific conditions that the Securities Exchange Commission must adhere to in order for the regulation to operate effectively. This ensures that the soundness and safety of the financial system are maintained.
Meanwhile, Senator Ihenyen, the Lead Partner and Head of Blockchain and Virtual Assets Practice at Infusion Lawyers, believes that by regulating virtual assets instead of resisting them, the CBN and other regulators are in a much better position to ensure the stability of the financial system.
This approach allows for the integration of cryptocurrencies into the Nigerian economy, providing opportunities for growth and innovation. One of the key benefits of this regulation is the ability for the government to tax cryptocurrencies.
With proper regulation in place, the government can now collect taxes from cryptocurrency transactions, contributing to the country’s revenue.
Nigeria’s decision to regulate cryptocurrencies has reflected a global trend of countries recognising the potential of digital currencies and embracing them as part of their financial systems.
As more countries adopt this approach, it is expected that cryptocurrencies will become increasingly mainstream and play a significant role in shaping the future of finance.
Nigeria’s move to regulate cryptocurrencies is seen as a positive step forward.
With proper regulation in place, Nigeria is well-positioned to benefit from the opportunities that cryptocurrencies offer.
Chuta said, “Thankfully, our regulators will now work together to ensure consumer protection and investor safety. Nigeria can no longer afford to keep pushing digital assets underground, for obvious economic and security reasons, especially when you are number on in crypto adoption in Africa and a leading market in the globe.”
He added, “The CBN has adopted a regulatory approach that focuses on the financial institutions that are under its direct regulatory purview, not necessarily VASPs. Effectively, financial institutions will now be responsible for ensuring that its customers who are VASPs are complying with the relevant standards.”
For the Chief Executive Officer of the Centre for the Promotion of Private Enterprises, Muda Yusuf, the CBN must ensure adequate regulatory framework to reduce money laundering issues.
