- KuCoin has taken a step in its search for compliance in Nigeria
- The move comes in the face of rising hostility towards the sector from regulators.
- Market participants are split on whether the new regime is a sign of positive progress.
The Nigerian crypto sector has been shrouded in uncertainty in recent months amid claims bordering on currency manipulation, money laundering, and terrorism financing. With these claims fueling a broad crackdown on exchanges and their p2p services, lawsuits against Binance for tax evasion and money laundering, and trading restrictions on users, the sector has been rife with speculation of a blanket ban.
Against this backdrop, however, a recent KuCoin move has sparked hope for a turnaround in the country’s current crypto regulatory trajectory.
The Start of a New Regime?
KuCoin has taken a step in its search for compliance in Nigeria. In a July 3 email to customers seen by DailyCoin, the exchange, in “an important regulatory update,” disclosed that it would begin collecting Value Added Tax from Nigerian customers starting July 8, 2024.
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As explained in the announcement, the tax will be taken at a 7.5% rate from the transaction fees of all transactions on the platform. Using an example of a customer order to purchase $1,000 worth of BTC with a 0.1% fee worth $1, KuCoin noted that the customer would be charged an extra $0.075, which is 7.5% of the $1 fee, leaving them to get $998.925 worth of BTC.
In response to a DailyCoin request for comment, KuCoin stated that it was making the move in compliance with Nigeria’s Finance Act of 2021, which states that all goods and services supplied in Nigeria are subject to VAT unless specifically exempted.
Unsurprisingly, KuCoin’s new tax regime has received a flurry of reactions from the Nigerian crypto community.
Good News?
Responding to KuCoin’s recent decision, a number of users speculated that the move hinted at positive progress in communications between regulators and industry participants. Underscoring this sentiment, one user described the move as “a welcome development.” Similarly, another described it as “a win for the ecosystem.”
Despite these sentiments, in a conversation with DailyCoin, KuCoin stated that its move to collect VAT from Nigerian users came out of a desire to be compliant, leveraging the assistance of local experts instead of specific talks with or directions from regulators.
“As a forward-thinking business entity, KuCoin recognizes the importance of these provisions [the provisions of the Finance Act of 2021] and is dedicated to ensuring our operations are fully compliant with them.
To this end, we have sought the assistance of domestic experts to guide us through the intricacies of Nigeria’s VAT regulations. Their invaluable expertise leads us to meet regulatory requirements while continuing to offer our users a seamless and secure trading experience,” the firm wrote.
Still, the exchange asserted that the move to collect VAT marked a significant step in its goal of compliantly expanding its services in Nigeria as it pursues licensing.
KuCoin’s new VAT policy comes roughly three months after Nigeria’s tax authority, the Federal Inland Revenue Service (FIRS), sued Binance for tax evasion in a four-count charge that included non-payment of VAT and aiding customers to evade taxes. It also comes nearly two months after KuCoin itself decided to “temporarily pause” its p2p service in the country to ensure compliance.
At the time of writing, the FIRS has yet to return a DailyCoin request for comment. At the same time, Binance and OKX have yet to return requests for comment on whether they are also considering implementing VAT for Nigerian users.
On the Flipside
- Other exchanges favored by Nigerians, including Binance, Bybit, OKX, and Bitget, have yet to implement similar tax regimes.
- KuCoin’s naira p2p marketplace is still down.
Why This Matters
Nigeria has grown to have one of the highest crypto adoption rates in the world. The rapid erosion of the value of the country’s local currency and rising inflation have driven citizens to seek USDT and Bitcoin exposure. However, the country’s recent hostile stance toward the industry has left the industry and market participants fearing a blanket ban. KuCoin’s recent decision to implement VAT highlights the ongoing efforts of firms seeking to turn the tide and gain regulatory approval.
Read this for more on KuCoin’s moves in the Nigerian market:
KuCoin Latest To Pull Naira P2P in Nigerian War on Exchanges
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