KuCoin, a prominent cryptocurrency exchange, has recently announced the incorporation of a 7.5% value-added tax (VAT) on transaction fees for users in Nigeria who have completed their Know Your Customer (KYC) registration. This new taxation policy, which takes effect from July 8, specifically impacts transaction fees and not the overall transaction volume. While the rationale behind this decision seems transparent, its timing amid the ongoing government ban on crypto websites, including KuCoin, has raised legitimate concerns within Nigeria’s crypto community.
Lucky Uwakwe, President of the Blockchain Industry Coordinating Committee of Nigeria (BICCoN), has expressed apprehensions regarding the enforcement of this new tax. The challenges include the verification of user counts, accurate trade reporting, and the management of tax remittance by the government. The absence of clear guidelines regarding these aspects raises compliance and transparency issues.
In light of the financial restrictions imposed by the Central Bank of Nigeria (CBN) on converting cryptocurrencies to fiat currencies, questions arise concerning how KuCoin plans to remit the VAT collected. This situation presents a quandary regarding whether banks would process crypto-related transactions in accordance with existing policies.
The introduction of VAT on crypto transactions by KuCoin could signal a shift in governmental attitudes towards the recognition of digital assets. It has been viewed by some, including local crypto analyst Rume Ophi, as a positive step that might lead to the formal acceptance of cryptocurrencies as legitimate financial instruments in Nigeria. However, the continued prohibition by the CBN, initiated in 2021, remains a significant impediment, hindering the growth of the nascent crypto industry in Nigeria.
There is speculation that this tax could be a precursor to more comprehensive crypto regulations, potentially allowing banks to facilitate crypto trades beyond peer-to-peer transactions. However, the lack of clarity on this matter has led to speculation among users and stakeholders.
