The Future of Cryptocurrency in Nigerian Law: What Business Can Expect

The Future of Cryptocurrency in Nigerian Law: What Business Can Expect

By Abdulazeez Waliyulah Olamilekan

Nigeria’s authorities went from blunt banking bans to a more structured tack against cryptocurrency. At the start of 2021, the Central Bank of Nigeria (CBN) ordered banks to shut down crypto accounts, effectively decoupling exchanges from the official bank system. But the CBN never prohibited crypto outright, trading was diverted to peer-to-peer markets. Today, the landscape is shifting: authorities are setting up crypto as a regulated financial asset, rather than a wayward novelty.

Recent Regulatory Developments

Nigerian regulators have been heavily influencing crypto regulation. Towards the latter part of 2023, the CBN issued VASP Guidelines for Virtual Asset Service Providers. The regulations allow approved crypto businesses to open naira accounts at banks (banks remain excluded from accepting crypto on their books). Banks under the new policy can cater to “crypto businesses” if they have strict KYC/AML norms and the crypto firm possesses a genuine license from the Securities and Exchange Commission (SEC). This is a reversal of the 2021 policy.

Although the SEC has been building a regulatory framework for digital assets,. It promulgated the Digital Assets Rules in 2022, which defined categories such as Virtual Asset Service Providers (VASPs), digital exchanges and custodians that must be registered or licensed to be undertaken. More recent is the Accelerated Regulatory Incubation Program (ARIP) (2024), a tailor-made onboarding mechanism for start-ups to comply with SEC regulations. Importantly, the Investment and Securities Act 2025 unequivocally includes “virtual assets” under the definition of securities. In practice, this means crypto assets are now regulated by the SEC (similar to stocks or bonds), giving SEC outright jurisdiction to license and regulate crypto business models.

Important points:

CBN Policy Reversals: CBN’s 2021 circular barred banks from dealing with crypto; Dec 2023 VASP Guidelines allow banks to accept accounts from SEC-licensed crypto businesses.

SEC Regulations: SEC’s 2022 rules imposed licensing levels (VASPs, DAOPs, DACs, DAXs) on crypto companies. The ISA 2025 puts crypto firmly in the fold of the SEC-regulated security.

Licensing Preparation: Each token issuer, wallet provider or exchange in Nigeria will need to be SEC registered and adhere to capital/KYC requirements (e.g., the SEC requires VASPs to show N500 million paid-up capital).

Taxation and the Finance Act

Businesses need to know that profits from cryptocurrency are taxable. Finance Act 2023 altered tax law to include digital assets: it imposes a 10% Capital Gains Tax on profits arising from the sale of crypto or digital assets. In reality, this will render any profit gained from selling crypto in return for fiat currency taxable. Nigeria’s tax office (NRS) is urging businesses and traders to pay and declare taxes on crypto gains, though enforcement is still picking up speed. National Revenue Service thus far relies on voluntary declaration of crypto gains and building capability to observe trading volume. In addition, services charges on trades of crypto have attracted VAT some 7.5% in recent guidance.

Key points:

Crypto CGT: Finance Act 2023 brings “digital assets” into chargeable capital gains. Profits on sales of crypto are tax under a flat rate of 10%.

Record-keeping: Keep detailed records for all transactions of crypto, as capital gains tax and VAT liability will be payable. Failure to do so could result in penalties as enforcement tightens.

Looking Ahead

Times are changing. By mid-2025 the SEC’s new Digital Assets Rules will be in full effect, enhancing regulation and introducing additional license categories. Regulators will continue to streamline crypto policy to align with global standards and local needs. We could witness more defined rules on stablecoins, greater enforcement of anti-fraud, and expanded AML/CFT standards according to FATF guidelines. It was observed that Nigeria’s shift from reactive prohibition to proactive regulation paves the way for further reforms in line with global trends. In short, a free, regulated crypto market will ultimately emerge, but banks and policy-makers will remain vigilant for the risk of currency speculation.

Action Steps for Startups and SMEs

Firms that plan to explore the world of crypto or use blockchain should get ready now:

Get compliant and licensed: Check whether your activity (exchange, wallet service, token offering, etc.) needs to register under the SEC’s digital assets rules. Start applying for the concerned license (VASPs, DAX, etc.) and intend to participate in the SEC’s incubation program (ARIP) if eligible. Take advice from experts in law if necessary.

Work with regulated banks: Use the CBN’s VASP Guidelines to open naira accounts. Have your company pass banks’ KYC/AML screenings and be SEC cleared. That will make it simpler to transfer funds in and out of crypto transactions officially.

Have good KYC/AML controls in place: Incorporate good customer due diligence and anti-fraud procedures. Regulators now expect strong AML/CFT compliance from crypto operators, and shortcomings can lead to enforcement or account freezing.

Keep accurate records: Record each crypto transaction and payment. Nigeria taxes crypto at the transaction level (CGT on gains), so accurate accounting is essential for tax compliance. Consider using accounting software that accommodates crypto entries.

Capitalize plan: Understand that the SEC demands substantial minimum capital (e.g., VASP licensing paid-up capital of N500 million). Include these capital requirements in your business plan if you’re going to register an exchange or any similar platform.

Be current and nimble: Nigerian cryptocurrency legislation will continue to evolve. Stay attuned to CBN and SEC announcements, and consider joining trade associations or conducting periodic legal reviews. Being proactive e.g., engaging with regulators or complying with upcoming legislation, will give you an edge.

By doing this at this time, Nigerian startups and SMEs can ride out the changing crypto regulation landscape. Taking the compliance path will not only satisfy the new regulations, but it will also gain investors’ and customers’ confidence as digital finance deepens in Nigeria.