TIMELINE: From ban to taxation — FG’s journey to cryptocurrency acceptance

Bitcoin and other cryptocurrencies have long been a topic of debate and regulatory scrutiny worldwide, and Nigeria has been no exception.

In February 2021, the Central Bank of Nigeria (CBN) issued a circular to deposit money banks (DMBs), non-bank financial institutions (NBFIs), and other financial institutions (OFIs) to close accounts of persons or entities involved in cryptocurrency transactions within their systems.

The CBN further warned local financial institutions against dealing in crypto-assets or facilitating payments for crypto exchanges.

The apex bank cited concerns over money laundering, terrorism financing, cybercrime and the volatility of cryptocurrencies as reasons for the ban.

The directive received significant backlash from the Nigerian public and the cryptocurrency community, as many saw it as a hindrance to technological advancement and economic growth.

However, just two years later, the government has taken a surprising turn by introducing taxation on cryptocurrencies.

Here is a timeline of major events in the two-year period that shaped the evolution of Nigeria’s stance on cryptocurrencies.

February 5,2021: CBN directs banks to close accounts of persons or entities involved in cryptocurrency transactions within their systems.

February 9, 2021: CBN launches investigation into financial institutions offering services to cryptocurrency traders.

February 11, 2021: The senate invites the CBN, the Securities and Exchange Commission (SEC) to discuss opportunities and threats of cryptocurrency on Nigeria’s economy and security.

February 18, 2021: The International Monetary Fund (IMF) backs CBN, says cryptocurrencies may be used for illegal activities.

February 22, 2021: The SEC says there is a need to regulate cryptocurrencies.

February 26, 2021: Yemi Osinbajo, Vice President of Nigeria, calls for a regulatory framework for cryptocurrencies rather than an outright ban.

March 21, 2021: The CBN clarifies its position on the ban and states that individuals  are not prohibited from buying and trading crypto, just not through any Nigerian bank or fintech.

April 15, 2021: SEC says discussion is ongoing with the CBN over the regulation of cryptocurrencies.

April 26, 2021: The Economic and Financial Crimes Commission (EFCC) warns Nigerians to be cautious before investing in Bitcoin.

July 22, 2021: The CBN announces plans to launch the “ eNaira”—a central bank digital currency (CBDC) — which is quite different from Bitcoin and other cryptocurrencies.

October 25,2021: Nigeria becomes first African nation to launch a digital currency — the “eNaira”.

April 7, 2022: CBN hits six banks with a N1.3 billion fine over alleged non-compliance with its regulation on accounts of cryptocurrency traders.

May 15, 2022: The SEC recognises digital assets as securities and issues regulations on exchange and custody of cryptocurrencies in the country.

INTRODUCTION OF TAXATION ON CRYPTOCURRENCY 

The federal government surprised many by announcing its decision to tax cryptocurrencies.

The government said it recognised the growing adoption and economic significance of digital assets and aimed to harness their potential for revenue generation.

By doing so, Nigeria joins the league of jurisdictions currently taxing digital assets, including the United Kingdom, the United States of America, Australia, India, Kenya and South Africa.

December 2, 2022: Zainab Ahmed, minister of finance, budget and national planning, says there is a provision to tax cryptocurrency and other digital assets in the latest finance bill.

May 28, 2023: President Muhammadu Buhari signs the 2023 finance bill into law. The law introduces a 10 percent taxation of gains on the disposal of digital assets including cryptocurrency. The law is effective as of May 1, 2023.