FG’s plan to tax digital currencies may push traders to into underground financing—stakeholders

Federal Government Plan to tax digital currencies’ transactions under the new Nigeria Tax Administration Act (NTAA), is raising serious concerns among digital asset operators who fear it will accelerate a shift toward peer-to-peer 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. 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. Convener of Lagos Blockchain Week, Chukwuemeka Enoch Mbaebie, said that the layers of compliance embedded in the NTAA will discourage many small-scale traders who currently rely on centralised exchanges.

He said that the mandatory KYC processes, NIN/Tax Identification Number linkages, and quarterly transaction reporting are likely to make formal trading less attractive. According to him, these burdens “could deter retail traders” and lead to a resurgence of unlicensed person to person under ground 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.

Also the President of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN), Obinna Iwuno, warns that the tax framework could unintentionally empower underground markets transaction in digital assets. He argues that traders may reduce activity on licensed exchanges and instead migrate to informal networks where enforcement is weak or non existence. 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. Ice said that 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.