Cryptocurrency [1] is
a digital asset designed to work as a medium of exchange using cryptography to
secure the transactions and to control the creation of additional units of the
currency[2].
The use of Cryptocurrency as gained strength
in Nigeria. The use of Cryptocurrencies in Nigeria may not be unconnected with
the move by the central bank of Nigeria to stop the capital outflow of foreign
currencies from Nigeria.
The extreme volatility of digital currency has
forced many governments to warn its citizens of the use of the unregulated
currency or money known as digital currency with some countries taking the
extreme measure of banning its use and making it a crime to hold, own or
purchase Bitcoins or any related cryptocurrency. Bitcoin has been called
“digital gold,” and for a good reason. To date, the total value of the currency
is close to $9 billion
Pictured below is a list of the most used
cryptocurrencies in the world, with Bitcoin taking the lead.
Unlike other cryptocurrencies Bitcoin is
different: It wholly replaces central bank currencies with a digital version
that’s tougher to forge, cuts across international boundaries, can be stored on
your hard drive/Flash Drive instead of in a bank, and perhaps most importantly
to many of Bitcoin’s users isn’t subject to the inflationary whim of a Central
bank or government decides to print more money.
Problems Associated With Digital Currencies
It can be used for money laundering,
activities such as drug dealing, to finance terrorism because many digital
currencies offer anonymity services.
Proliferation of Ponzi schemes are easier to
propagate as fake digital currencies may be used to attract unsuspecting
consumers as it isn’t under any government’s control.
It is Difficult to tax as it is not recognized
as a currency, although it can be classified as a good or products which can be
used as barter goods.[3].
It is not recognized by any regulatory agency
in Nigeria, so fraudulent activities by businesses and individuals are likely
to succeed and continue unabated until cryptocurrencies are regulated in
Nigeria.
Usage
According to localbitcoins[4] Nigeria’s
weekly Bitcoin exchange volumes since mid-December 2016 have increased from
more than ₦400 million, which is close to $1.3 million[5] to
Over ₦1 Billion which is about $3 Million
Regulation across the World
On 25 September 2013, the analytical
department of Ministry of Finance of Czech Republic published legal guidance
for buying and selling digital currencies. Transactions worth more than 1,000
EUR are considered “AML high-risk”[6] in
accordance to S 6 para. of Act No. 253/2008 Code while transactions worth more
than 15,000 EUR are considered “AML suspicious” in accordance to Section 18 of
Act No. 253/2008 Code.
In America, the Bit License, a local regulatory framework formulated by
New York’s Department of Financial Services is already in place to regulate
digital currency businesses operating in the state.
The European Union has passed no specific
legislation relative to the status of the bitcoin as a currency within its
territory. In October 2015, the Court of Justice of the European Union ruled
that
“The exchange of traditional currencies for units of the
‘bitcoin’ virtual currency is exempt from VAT” and that “Member States must
exempt, inter alia, transactions relating to ‘currency, bank notes and coins
used whileas legal tender’”, making bitcoin a currency as opposed to
being a commodity[7].
On the other hand The United Kingdom, has
created a regulatory framework that bends over backward to make it easy and
quick for innovative startups and entrepreneurs to comply with the appropriate
consumer protection regulations and safely enter the market.”
As against the ruling of the Court of Justice
of the European Union stated above, bitcoin is not yet recognized as a currency
in Nigeria. However, I believe that it can be classified as a good or product
thus, taxable under the Capital Gains Tax Act, 2004[8] which
would lead to the generation of more revenue for the Nigerian Government
Conclusion
Regulation may be needed to protect consumers
and the wider financial system in essence bitcoin and other cryptocurrencies
should not remain in a legal vacuum, without the appropriate supervision and
unless serious action is taken by the CBN and other potential regulatory
agencies to make it clear to the Nigerian people and companies on the
modalities on use of digital currency [9].
It is important the government issues
modalities for individuals and companies participating in the trading of
digital currencies.
The money laundering act [10] would
also need to be amended so as to allow for the recognition of digital
currencies. A benchmark for trade in digital currencies should also be set so
as to enable security agencies flag investigate the trading and use of digital
currencies to prevent terrorism amongst other nefarious acts. The Money
Laundering Act [11] would
also need to be amended to cover digital currencies.
With an unclear regulatory stance on
cryptocurrencies in Nigeria and the constant delay being exhibited by the CBN
in reeling regulations, it remains unseen how Nigeria expects to positively
utilize the unruly product called cryptocurrency. The ownership or possession of
bitcoin, etherum or related cryptocurrencies is therefore not illegal in Nigeria.
[2] Cryptocurrencies
are a subset of alternative currencies, or specifically of digital currencies.
Today, there are over 700 digital currencies in existence [2].
[3] http://www.lawyard.ng/wp-content/uploads/2016/01/CAPITAL-GAINS-TAX-ACT.pdfLast
Accessed January 30 2017
[4] Localbitcoins.com A website dedicated to viewing Cryptocurrency
transactions near a persons location
[5] http://www.thisdaylive.com/index.php/2017/02/01/weekly-bitcoin-volumes-cross-1m-in-nigeria-raise-speculations/
[8] http://www.lawyard.ng/wp-content/uploads/2016/01/CAPITAL-GAINS-TAX-ACT.pdfLast
Accessed January 30 2017
[9] Nigeria’s
alleged interest in regulating digital currencies comes amid similar efforts
elsewhere across the world
Source: lawyard.ng
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