Is Bitcoin legal in Nigeria? Is Bitcoin illegal in Nigeria? These two questions are some of the most asked questions by new Nigerian cryptocurrency enthusiasts who are confused by the not so straightforward regulatory environment in Nigeria.
This article provides an answer to the question of the legality bitcoin and other cryptocurrencies in Nigeria.
A quick answer to the question is: Bitcoin is neither legal or illegal in Nigeria. Instead, it is an unregulated aspect of financial assets and tools. However, regulators have shown interest in potentially regulating cryptocurrencies, while some have expressed negative sentiments.
Let’s get some in-depth understanding of what is actually happening:
Bitcoin is a protocol which means bitcoin as a technology cannot be controlled; instead, some aspects of its use cases can be monitored and regulated. Further, bitcoin is operated in a deregulated environment, which means that no central body exists that can take responsibility for the existence of bitcoin and actions on the network.
Bitcoin was created by Satoshi Nakamoto, an unknown developer in 2009. You can read more about the origin of bitcoin from this article: Bitcoin Explained To Newbies.
This structure varies from the banking industry, which is heavily regulated. Nevertheless, various countries have set up regulatory instruments to make cryptocurrencies compliant with existing financial regulations.
There are no official restrictions or ban on the use of bitcoin in Nigeria. Also, the government has not passed any regulation that makes bitcoin legal. It is currently unclassified, either as a currency, commodity, or new asset class.
The Security Exchanges Commission (SEC), in some statements in the past, has warned the public to be careful when making bitcoin investments or dealing with people in the bitcoin ecosystem.
The official public notice states:
The attention of the Securities and Exchange Commission has been drawn to radio advertisements and other modes of solicitations of the public to invest in cryptocurrencies such as Swisscoin, OneCoin, Bitcoin and other such virtual or digital currencies. The public is hereby advised to exercise extreme caution with regard to digital (cryptocurrencies) as a vehicle of investments.
CBN Bans Banks From Crypto-Related Business
The Central Bank of Nigeria (CBN) passed a circular on January 17th, 2017, asking Nigerian financial institutions, including banks, that transactions in bitcoin and other virtual currencies are banned in Nigeria.
This circular means that banks and other financial institutions are prohibited from engaging in bitcoin transactions and setting up virtual currency exchanges. The CBN is yet to issue a guideline for the masses on bitcoin and other cryptocurrencies.
The lack of regulation also means you are not required to pay tax on bitcoin in Nigeria.
Recent developments around regulations from the Nigerian finch and cryptocurrency community saw The Fintech Association of Nigeria present a report to the SEC. The report includes suggestions on how bitcoin and other cryptocurrencies should bee regulated in Nigeria.
How To Acquire Bitcoin Legally In Nigeria
You can get your hands on bitcoin by mining, earning our buying. As at the time of writing, there are no laws against mining bitcoin in Nigeria, earning and holding bitcoin in Nigeria. However, platforms for buying bitcoin in Nigeria have implemented some steps to make them regulatory friendly.
Purchasing bitcoin on most platforms will require you to verify your identity. This step is part of Know-Your-Customer and Anti-money laundering regulations, mostly common in financial institutions. It is done to minimize the risks of potential fraud and the use of accounts for criminal activities.
Buying bitcoin from well-established platforms is relatively safer and also reduces the possibility of encountering trouble from regulators. Exchanges clamp down on cryptocurrencies involved in illegal activities, protecting other users.
On the other hand, buying from the free market might be dangerous since potentially flagged cryptocurrencies may be found in your custody.
Will You Get Arrested For Using Bitcoin in Nigeria?
Yes, you can get arrested for using bitcoin in Nigeria, and no, you will not be arrested for using bitcoin in Nigeria. You are not likely to get arrested for merely using bitcoin.
However, if you use bitcoin during criminal activity, you will might be caught and get arrested. In this instance, you are not being arrested for using bitcoin but for engaging in illegal activities.
This is certainly not legal advice. It’s an educational piece that seeks to provide information. If you are about to embark on a venture that you aren’t sure of, you should consult a lawyer.