By Michael Scott
The crypto exchange KuCoin announced compliance with Nigeria’s regulatory changes by adding a 7.5% value-added tax (VAT) in transactions. KuCoin vows to comply with the regulatory shift for Nigeria crypto and promises to enforce 7.5% VAT on transactions starting Monday, July 8.
The Wednesday update by KuCoin portrays signs of a regulatory shift in Nigeria in the communication conveyed to the customers. The crypto exchange platform informed clients of the additional tax due for enforcement beginning July 8.
KuCoin Enforces 7.5% Tax on Transactions
KuCoin indicated that VAT collection is compulsory for Nigerian users whose KYC information affirms their registration. KuCoin’s Africa account echoed similar information on X, which stated that the 7.5% VAT applies to all transactions.
KuCoin’s declaration to add VAT on crypto-based transactions is no exception. In the past, Nigeria has attempted to impose a tax on crypto transactions.
Former Nigerian president Muhammadu Buhari assented to the law the 2023 Finance Act. The law introduced regulatory changes to scale the country’s revenue drive, including a 10% capital gains tax enforced on the profits realized from digital asset disposal.
In a recent update, Nigeria’s Security and Exchange Commission (SEC) revealed that digital assets are a composite classification for crypto, security tokens, and non-security.
Experts decried that the regulatory uncertainty on crypto status in Nigeria was the primary challenge that incapacitated capital gains tax collection. Experts anticipate that the new VAT fee introduced by KuCoin will attract sentiments similar to past attempts to enforce the tax on crypto transactions.
Nigeria’s SEC chief, Emomotimi Agama, indicated that the regulatory agency is noncommittal to the new tax. Nonetheless, enforcing tax on crypto transactions amounts to an early call from the sector within Africa’s leading populous country.
The addition of VAT on crypto transactions raises concerns shared by the community regarding its broader implications on the burgeoning space.
The SEC recently projected the crypto industry to have a $400 million value. In a Friday press conference, the SEC chief revealed optimism of a surge in crypto trade volume in the subsequent years despite the crackdown targeting exchanges.
Agama profiled Nigeria as a thriving space for crypto, with the market set to surpass its present $400 million value. The SEC’s executive admitted that most people were undertaking crypto trading and transactions.
Nigeria is among the leading markets for crypto assets, and any regulatory decision would likely impact investor confidence. Besides, adding the 7.5% VAT will influence market dynamics and its projected growth.
Nigeria Regulatory Shift for VASP Registration
Last month, the SEC directed all crypto exchanges and traders to re-register within 30 days or face enforcement actions. The agency explained that the move constitutes an effort to regulate the trading of crypto assets.
The SEC clarified that the new registration requirement aimed to amend crypto-asset issuance rules. It directs re-registration for all platforms, exchanges, and custody to comply with the virtual asset service providers (VASPs) directive.
Nigeria is a critical market in the crypto space, which is made possible by its gigantic population. Chainalysis ranked Nigeria 11th in the 2022 ranking via the Global Crypto Adoption Index.
The burgeoning crypto industry has witnessed several restrictions by the authorities. Key among them is the prohibition of banks by the country’s central bank from executing crypto trading.
The two-year ban did not dampen the crypto spirit in Nigeria as it rose to second rank on the Chainalysis index last year.