Plans to tax cryptocurrency transactions under the Nigeria Tax Administration Act (NTAA), is raising serious concerns among digital asset operators who fear it will accelerate a shift toward peer-to-peer (P2P) trading.
Stakeholders argue that the combination of new tax obligations, strict reporting requirements, and lingering regulatory uncertainty may drive users away from licensed exchanges, undermining the government’s objective of formalising and monitoring the sector.
The NTAA, which comes into force from January 2026, introduces significant compliance demands on Virtual Assets Service Providers (VASPs), including mandatory registration with the tax authority, detailed KYC data retention for seven years, and compulsory reporting of large or suspicious transactions to both the tax authorities and the Nigerian Financial Intelligence Unit (NFIU).
Non-compliance attracts a N10 million penalty in the first month and N1 million for each subsequent month, alongside potential licence suspension or revocation by the Securities and Exchange Commission (SEC).
“Taxable virtual assets transactions shall include –the sale! exchange, or transfer of virtual assets; mining or staking activities that generate income; airdrops, bounties, or any form of virtual asset received as compensation or reward; and any other transaction or activity relating to virtual assets.
“Transactions where payment for goods and services is made with virtual assets shall be subject to the same tax treatment as transactions conducted in fiat currency,” the Act states.
Rising costs and compliance burdens
Stakeholders in the blockchain industry caution that the new tax obligations will push retail traders, who constitute a significant portion of Nigeria’s crypto user base, toward P2P platforms where transactions are harder to track and enforce.
Speaking with Nairametrics, Convener of Lagos Blockchain Week, Chukwuemeka Enoch Mbaebie, notes that the layers of compliance embedded in the NTAA will discourage many small-scale traders who currently rely on centralised exchanges.
- He explains that the mandatory KYC processes, NIN/Tax Identification Number linkages, and quarterly transaction reporting are likely to make formal trading less attractive.
- According to Mbaebie, these burdens “could deter retail traders” and lead to a resurgence of unlicensed P2P activity, as users seek to avoid direct oversight and tax implications.
- He predicts a surge in P2P transactions and warns that this could create new challenges for regulators, particularly around capital flight and untraceable flows.
Risk of deepening the underground market
Sharing similar concern, the President of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN), Obinna Iwuno, also warns that the tax framework could unintentionally empower P2P markets.
He argues that traders may reduce activity on licensed exchanges and instead migrate to informal networks where enforcement is weak.
Iwuno points to existing user behaviour as an example, noting that the introduction of a 7.5% VAT on certain exchanges already prompted many traders to abandon platforms like KuCoin.
In his view, an additional tax regime arriving before Nigeria has issued comprehensive crypto licences will intensify this shift.
“The tax regime will chase a lot of traders to P2P, which is not a market we should encourage to thrive. And it is in the hands of the regulators to actually make sure that it does not thrive.
“It is not by chasing people around. If you license more people, those people whom you license will make sure that nobody is operating underground, because it will be detrimental to their own business.
“They can’t spend money on incorporation, application, licensing, and then somebody is on WhatsApp or offline somewhere doing businesses while they have running costs and are not doing business. They will be the ones to check the market. They will be the ones to whistleblow,” Iwuno said.
Licensing gaps may weaken enforcement efforts
A recurring concern among stakeholders is that the tax is being introduced before Nigeria has provided full licensing clarity to the sector.
- Iwuno notes that only two crypto exchanges, Quidax and Busha, currently hold Approval-in-Principle licences, with no fully operational licences issued. He argues that without a broad base of licensed operators, the tax regime will struggle to gain traction.
- He further suggests that expanding licences, accelerating the SEC’s Accelerated Regulatory Incubation Programme (ARIP), and introducing a tiered licensing system could strengthen the formal market.
- With more licensed exchanges, he said, self-regulation would naturally emerge as compliant operators work to protect their investments by reporting unlicensed competitors.
Need to grow the crypto industry
According to Iwuno, what the crypto industry needs is support from the government to grow, adding that the government would gain more when the industry becomes well-developed.
“We should be looking at tax holidays or favourable tax regime. This is a new industry, the government should be looking at ways to expand it so that it will be the biggest gainer in the long run,” he said.
The SiBAN President lamented that despite being the second in crypto adoption globally, Nigeria still lacks proper regulation, adding that regulation should have come before any discussion about tax.
What you should know
In August 2024, SEC, in its first crypto regulation move, granted an Approval-in-Principle to two crypto exchanges, Quidax and Busha, giving them the status of legally recognised crypto trading platforms in the country.
The two exchanges were approved under the Accelerated Regulatory Incubation Program (ARIP) of the Commission.
- At the time, the SEC had noted that the approved firms were not the only entities that had applied to ARIP and the RI Program.
- It added that other applications received were being assessed and would be granted Approval-in-Principle on a case-by-case basis as they meet all its requirements.
- However, over one year later, the SEC has yet to grant approval to another exchange despite the queue of several exchanges that have applied to the regulator.
- This has continued to generate concerns among stakeholders, even as the excitement created last year about the prospects of the licensing has now waned.
However, at a meeting with fintech stakeholders earlier this year, the Director General of SEC, Emomotimi Agama, explained that the issuance of crypto licences was being delayed because a lot of issues had come up from the first set of licences that require a higher level of due diligence.