Nigeria's new tax law exposes crypto transactions, making VASPs key to compliance

The Nigerian government has just enacted a new tax law that links crypto transactions to real identities using Taxpayer Identification Numbers (TIN) and National Identity Numbers (NIN), enabling systematic tracking of the crypto market. This is not merely a policy declaration but a comprehensive enforcement system involving multi-layered cooperation among Virtual Asset Service Providers (VASPs), tax authorities, and law enforcement agencies. For Nigeria, one of Africa’s largest economies, this marks the first time crypto transactions are incorporated into an official tax reporting framework.

Policy Core: How Identity Linking Enables Tracking

The clever aspect of this new tax law is that it does not require cracking the blockchain itself but starts from off-chain data. By requiring VASPs to collect customers’ TIN and NIN information, the government establishes a correspondence between crypto transactions and real identities. This means every legitimate transaction through exchanges or service providers can be traced back to specific individuals or entities.

New Roles and Responsibilities for VASPs

Under the new law, virtual asset service providers are required to assume the role of information intermediaries:

• Collect customers’ TIN, NIN, name, address, and other identity details
• Report all transaction data to tax authorities on a monthly basis
• Report large or suspicious transactions to law enforcement agencies
• Maintain comprehensive customer profiles and transaction records

This effectively turns VASPs into government “tax assistants.” For exchanges and wallet providers operating in Nigeria, this means a significant upgrade in compliance systems and data management capabilities.

Dual Impact on the Market

Compliance Pressure and Market Adjustment

This policy will have a direct impact on Nigeria’s crypto market. In the short term, some users may shift to unregulated channels or self-custody wallets to evade reporting obligations. But in the long run, such pressure is likely to promote market normalization and transparency.

The Significance of the Background

According to reports, industry figures like Michael Saylor have emphasized that for people in countries experiencing currency collapse, such as Nigeria, Bitcoin is not just an investment tool but a survival tool. This reflects the genuine demand for cryptocurrencies in Nigeria. Against this backdrop, the government’s decision to incorporate rather than ban crypto indicates policymakers recognize the practical value of the crypto market.

Industry Significance and Future Impact

Nigeria’s move could serve as a reference model for other African countries. The current global trend in crypto regulation emphasizes “Know Your Customer” (KYC) and Anti-Money Laundering (AML) measures. Nigeria’s approach, combining identity tracking with tax reporting, forms a relatively complete framework.

This also signals to the industry: the era of complete anonymity in crypto transactions is ending. Future market participants will need to bear tax responsibilities for their transactions. For legitimate players—licensed exchanges and compliant service providers—this presents an opportunity to establish legal legitimacy.

Summary

Nigeria’s new tax law, through identity linking and monthly reporting, has established a comprehensive system for tracking crypto transactions, with VASPs serving as the key implementers. This policy is both a regulatory measure and an acknowledgment of the market. While short-term challenges such as user attrition and increased compliance costs may arise, in the long run, this is a necessary step toward institutionalizing the crypto market and gaining government recognition. Other countries are likely to follow this model, signaling that the era of complete anonymity in crypto is coming to an end, and the industry must quickly adapt to identity tracking and tax reporting becoming standard features.