Nigeria’s plan to tax cryptocurrency transactions from January 2026 is triggering alarm across the digital asset industry, with operators warning it could push traders away from regulated platforms into peer-to-peer markets. Industry leaders say the move risks undermining transparency just as authorities seek to formalise crypto activity.
The new Nigeria Tax Administration Act will impose wide-ranging obligations on Virtual Assets Service Providers. These include compulsory registration with tax authorities, seven-year retention of customer KYC records, and mandatory reporting of large or suspicious transactions to both tax officials and the Nigerian Financial Intelligence Unit. Heavy penalties are attached, including a ₦10 million fine in the first month of non-compliance and ₦1 million monthly thereafter, alongside possible licence suspension.
Stakeholders argue that the rising cost of compliance could deter retail traders, who form the backbone of Nigeria’s crypto market. Blockchain advocates say stricter reporting rules, combined with identity linkages to national IDs and tax numbers, may make centralised exchanges less attractive to everyday users.
Chukwuemeka Enoch Mbaebie, convener of Lagos Blockchain Week, says the layered compliance requirements could accelerate a shift toward informal P2P trading. He warned that traders seeking privacy or lower costs may bypass licensed exchanges entirely, increasing the risk of untraceable capital flows and enforcement gaps.
Similar concerns were raised by Obinna Iwuno, president of the Stakeholders in Blockchain Technology Association of Nigeria. He said past experience shows traders quickly migrate when costs rise, pointing to the drop in activity on some platforms after a 7.5 percent VAT was introduced. According to him, introducing a new tax regime before broad licensing is in place could deepen underground trading.
Iwuno stressed that Nigeria’s licensing bottleneck remains a major weakness. More than a year after the Securities and Exchange Commission granted Approval-in-Principle to Quidax and Busha, no additional exchanges have received full approval. He argued that without a wider pool of licensed operators, enforcing the new tax rules will be difficult.
Industry leaders are urging authorities to prioritise licensing expansion and consider incentives such as tax holidays. They argue that nurturing the sector first would ultimately deliver higher long-term revenue and stronger oversight in one of the world’s most active crypto markets.
