The Nigerian government must issue comprehensive regulations for the digital industry before it doubles down on taxing the sector, one industry leader says.
When the Securities and Exchange Commission (SEC) issued its first two provisional VASP licenses in September 2024, Nigeria’s digital asset community lauded it as the first step towards legitimizing the industry. Since then, dozens of VASPs have applied for the license, but the watchdog has dragged its feet, which is costing the industry millions of dollars, says Chike Okonkwo, the business development lead at YDPay, a Nigerian ‘crypto’ exchange.
While the SEC has claimed to support digital assets under pro-crypto Director-General Emomotimi Agama, its actions tell a different story, Okonkwo told local outlet The Cable.
However, this lack of comprehensive regulations hasn’t deterred the taxman from targeting the sector, which is “very concerning.”
“There is no clear-cut policy, and you are already including us in taxes. We have been saying we are open to working with you, but we should have a clear-cut policy before you tax us,” Okonkwo stated.
Okonkwo joins dozens of other industry leaders questioning Nigeria’s slow pace in implementing regulations and issuing licenses, yet the West African nation is on track to start taxing VASPs in 2026.
“The excuse the SEC is giving is that it’s trying to do a thorough job. The question is, how will they implement the tax regime coming next year without proper operator licences when only two exchange platforms are licenced?” questioned Rume Ophi, a renowned local digital asset analyst.
Nigeria’s approach, while deeply flawed, is not unique. Several other governments have taken a similar approach, with taxation being implemented first and licensing frameworks arriving years later.
India is one of the most notable Asian giants; it introduced a 30% tax on digital currency gains in 2022 and an additional 1% tax, deducted at source, on transactions a few months later, long before implementing any regulations for the sector.
In Africa, Kenya and South Africa started taxing digital asset transactions years before implementing policies for the industry.
Bureaucracy and understaffing derail VASP licensing in Nigeria
Nigerian VASPs have blamed administrative red tape and understaffing at the SEC’s digital asset team for the delayed licensing.
“Let’s put it on bureaucracy and how the government does its approval and checks…the [crypto] department was newly created. So, I am sure the people who are there might be overwhelmed by the application that has come in, because there are a lot of crypto companies,” Okonkwo says.
Senator Ihenyen, who heads the Virtual Asset Service Providers Association, concurs. He believes that the SEC isn’t solely to blame and “the problem is more systemic.”
“There is a clog in the entire regulatory fabric that even the most efficient Securities and Exchange Commission may struggle to navigate,” he says.
Others are far less forgiving. Ophi says Nigeria’s licensing of only two exchanges in 15 months is indefensible, especially when South Africa approved nearly 60 VASPs after rolling out its framework.
“How hard can it be to license crypto exchanges that have met the requirements stipulated in the Investment and Securities Act?” another industry leader asks.
This regulatory ambiguity is hurting innovation in Africa’s largest digital asset market, Okonkwo points out. Most VASPs have put their products and partnerships on hold while awaiting their licenses. Others are unable to access financial products from lenders who are hesitant to work with unlicensed companies.
It’s not just the industry that’s losing out, he added.
“If they need to even work with external consultants to speed up the process, they should do that because they are also losing money on the table.”
But while the regulators drag their feet, adoption remains unfazed. Nigeria has led the continent in digital asset ownership for years; in the year ending June, it accounted for 45% of Africa’s total digital currency volume at $92 billion. Its dominance extends beyond the region, topping the global P2P volume charts in 2023.
Watch: Blockchain is changing Nigeria’s tech city ecosystem
Source: https://coingeek.com/license-us-before-you-tax-us-nigerian-digital-asset-community/
