The Chairman of Nigeria’s Federal Inland Revenue (FIRS), Dr Zacch Adedeji, has revealed plans to introduce a bill on new tax laws for the country’s cryptocurrency market valued at $400 million by September 2024.

The crypto market, which has remained unregulated, is claimed to have played a part in the Naira depreciation against the dollar due to exchange rate manipulation and an outflow of about $26 billion, leading to a halt on peer-to-peer trading in Nigeria. Similarly, Nigeria’s Securities and Exchange Commission (SEC) , has revealed its plans to introduce and grant licences for providers of virtual/digital assets, including cryptocurrencies.

The SEC has noted that licenses will be issued as early as August 2024.

Analysts believe that all things being equal, regulatory approval should drive more crypto market participation as part of a structured and functional digital asset market.

In June the Nigerian SEC launched a new program aimed at speeding up the registration process of Virtual Assets Providers (VASPS).

SEC also announced amendments to its rules on Digital Assets Issuance, offering platforms, Exchanges, and Custody.

In an interview on Bloomberg, Nigerian SEC Chief Emomotimi Agama reiterated his commitment to regulating cryptocurrency in Nigeria for the sake of young Nigerians who are neck deep into the industry.

“Being a crypto enthusiast and fintech enthusiast, I can tell you without doubt that this is going to happen sooner than you think.”

Implementing cryptocurrency licensing and following other nations’ lead will align with global best standards. For example, the United Kingdom initiated a plan in 2020 requiring companies to register under its anti-money laundering regulations as part of its efforts to combat terrorism financing, with further regulations pending. Similarly, South Africa’s Financial Sector Conduct Authority (FSCA) recently introduced a cryptocurrency license, approving over 63 new applications in the second quarter of 2024. Meanwhile, France has also established a new regulatory framework for cryptocurrencies.

However, analysts urge the Nigerian government to adopt India’s regulatory approach to handle cryptocurrency issues. This comes after India recently resolved its conflict with Binance, which had faced allegations of violating operating rules.

India had initiated legal action against Binance, accusing the cryptocurrency exchange of tax evasion and money laundering, with one of its executives currently in custody on money laundering charges. To settle the matter, India’s Financial Intelligence Unit (FIU) imposed a fine of US$2.25m on Binance, required the exchange to register as a reporting entity, and allowed it to resume operations. Analysts view this as a pragmatic and effective approach to crypto regulation and recommend that Nigeria adopt a similar model to resolve its ongoing disputes with Binance executives.

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