KuCoin, a prominent cryptocurrency exchange, has declared that starting July 8, 2024, it will collect a 7.5% Value-Added Tax (VAT) on transaction fees for its users based in Nigeria. This announcement was made via a statement released on the exchange’s X account.
This new tax policy means that Nigerian users will now pay an additional 7.5% VAT on the fees for each transaction conducted on the platform, rather than on the total amount of the transaction itself. For instance, if a user purchases $1,000 worth of Bitcoin and the transaction fee is set at 0.1%, or $1, an additional $0.075 will be added as VAT, making the total fee $1.075. Consequently, the actual amount deducted from the user’s account for the transaction will be $998.925.
The statement from KuCoin detailed, “We are writing to inform you of an important regulatory update that impacts our users from the Republic of Nigeria. Starting from July 8, 2024, we will begin collecting a Value-Added Tax (VAT) at a rate of 7.5% on transaction fees in each trade for users whose KYC information is registered in Nigeria.”
KuCoin also clarified that the VAT would apply universally across all types of transactions on its platform, adhering to regulatory requirements set for Nigerian users. This move by KuCoin is seen as part of Nigeria’s broader efforts to enforce a comprehensive tax regime that includes digital assets, as outlined in the country’s Finance Act.
Nigeria stated its intent to tax cryptocurrency transactions back in 2022 when it revised the Finance Act to include a 10% tax on profits from digital assets, which include cryptocurrencies. This regulatory shift reflects Nigeria’s growing focus on capturing revenue from the expanding digital economy, especially as cryptocurrencies gain widespread usage.
Additionally, the announcement comes at a time of increased regulatory scrutiny for cryptocurrency platforms in Nigeria. On May 15, 2024, KuCoin had to suspend all peer-to-peer (P2P) trading and fast buy services using the naira card. This suspension followed a directive from the Securities and Exchange Commission, which halted P2P transactions across all cryptocurrency platforms in the country.
The scrutiny increased following the departure of Binance from the Nigerian market, after allegations by the Nigerian government that the platform was manipulating the naira-to-dollar exchange rate. This has led to heightened regulatory attention on how cryptocurrency platforms operate within the country.
KuCoin’s decision to impose VAT on cryptocurrency transaction fees is a significant shift in Nigeria’s approach to regulating the cryptocurrency market. It emphasizes how difficult and complicated it is to incorporate cutting-edge technologies like cryptocurrencies and blockchain into an established financial and legal system. Nigeria’s digital currency policies are still being refined, and investors, regulators, and other global cryptocurrency market parties are still debating how this will affect both domestic and foreign traders.
