Free ABSTRACT

This study centered on exploring on taxation of cryptocurrencies and digital assets in Nigeria”. methodology: relevant data were drawn from selected staff of patricia bitcoin in Lagos, using a well-structured questionnaire. pearson product moment correlation was used to check the hypothesis. the result of the findings revealed that there is a relationship  between taxation  and cryptocurrencies transactions in Nigeria . study conclusion and policy recommendations: the study concluded that exploring the taxation of cryptocurrencies and digital assets in Nigeria reveals a complex landscape that presents both opportunities and challenges. as the adoption of digital assets grows, so does the need for a clear and effective regulatory framework that can facilitate compliance while fostering innovation. proper taxation can generate revenue for the government, promote accountability, and enhance trust in the digital economy. however, without adequate education and awareness among users regarding their tax obligations, the risk of tax evasion remains significant. Finally the study recommends: that to effectively navigate the taxation of cryptocurrencies and digital assets in Nigeria, it is essential to develop a comprehensive regulatory framework that addresses the unique challenges posed by this emerging sector. this framework should be clear and transparent, providing detailed guidelines on tax obligations for individuals and businesses involved in digital assets. education and outreach initiatives are crucial to raise awareness among users about their tax responsibilities and the implications of non-compliance

Chapter one

Introduction

1.1       Background to the study

The emergence of cryptocurrencies have brought about a new wave of digital assets, and this substantial shift in the financial world has created born the disruptive financial influence of cryptocurrencies. Once believed to be solely a playground for computer geeks, cryptocurrencies has since grown into robust economic forces that aredisrupting traditional ideologies towards currency and financial management (Nakamoto, 2018). As a decentralized form of finance based on the blockchain system, cryptocurrencies disruption modes together with the seamless nature of transactions that bypass the banking institutions and legal systems of the traditional financial world, adopts an very direct and effective process (Catalini & Gans, 2016). The realization of such a revolution was brought about by Bitcoin, which was the first ever cryptocurrency. In recent years, the value and acceptance of cryptocurrencies including Bitcoin have soared since their creation in 2009, reflecting that the potentiality of investing in cryptocurrencies is slowly being recognized, as well as being seen as an alternative means of exchange (Glaser et al., 2014). The world's financial system is now experiencing a radical revolution considering that cryptocurrency has rapidly risen in value such that its total market value is nearing $1 trillion as of early 2021 (CoinMarketCap, 2021). This revolution is not a mere fad. Nonetheless, it cannot be denied that there are several issues that need to be addressed when cryptocurrencies become an integrated part of the economy. For example, one of the pressing issues relating to cryptocurrencies involves the tax consequences associated with using bitcoin. Indeed, legislators, tax authorities, and the financial industry have continuously debated on this issue (Auer & Claessens, 2018).

In a bid to foster adherence to and fairness in the tax system while taking into consideration the unique nature of cryptocurrencies, the international community has been striving to address these problems and come up with logic-based tax rules. However, the process is hindered by the fact that cryptocurrency may be classified either as property, currency, or something else, hence the lack of uniformity regarding the tax status in several jurisdictions (Zagaris, 2019). Besides, the matter is further compounded by the fast-changing cryptocurrency landscape and emergence of other digital asset types such as NFTs, requiring tax agencies to constantly be alert and flexible (De Filippi & Wright, 2018). With the importance of cryptocurrencies rising and being used in mainstream financial operations, it becomes necessary for one to have advanced knowledge on the same in relation to taxes. The challenge is not only developing efficient tax policies, but promoting cooperation between countries in dealing with the cross-border nature of cryptocurrencies to ensure stability and flexibility of the tax system amid technological advancements. It is in light of the above that this study focuses on analyzing the tax implications of cryptocurrencies and digital assets in Nigeria.

1.2 STATEMENT OF THE PROBLEM

Nevertheless, the increasing use of such measures both in Nigeria as well as other countries provide an insight of a challenge faced by the republic in regard to the taxation of the measures. "Despite that individuals and businesses conduct activities in the emerging digital economy, relevant tax rules for them is very complicated. Such uncertainty acts as a thorn in the effort of taxing on the part of individuals as well as organizations in regard to digital transactions since there is no revealed clarity with regard to the stages of taxing such transactions. The lack of any methodical approach on taxation of digital assets deprives Nigeria nation form the revenue generating capacity of such transactions. If other countries go a step further to put the right taxation measures for such transactions is a threat to Nigeria's competitive advantage when it comes to the taxation of digital measures.

1.3 Objectives of the study

The objective of the study is exploring the taxation of cryptocurrencies and digital assets in Nigeria. Other specific objectives include:

1) To examine the impact of taxation on crypto currency transactions in Nigeria

2)  To examine the impact of Digital assets on the economy of Nigeria

3) To evaluate how crypto currency and digital assets  promotes tax evasion and evidence in Nigeria

1.4 RESEARCH QUESTIONS

1) What is  the impact of taxation on crypto currency transactions in Nigeria?

2)  what is the impact of Digital assets on the economy of Nigeria?

3) How does crypto currency and digital assets  promotes tax evasion and evidence in Nigeria?

1.5 Hypothesis

Ho1: there is no significant relationship between taxation and crypro currienceis transactions in Nigeria

1.6 Significance Of The Study

 The significance of studying the taxation of cryptocurrencies and digital assets in Nigeria lies in its potential to shape economic policy and regulatory frameworks in an evolving financial landscape. As digital assets gain popularity, understanding their tax implications is crucial for ensuring that the government can effectively capture revenue while promoting innovation. This study can provide insights into how taxation can enhance compliance among users, mitigate risks of tax evasion, and foster a transparent digital economy.

Moreover, it addresses the urgent need for a clear regulatory framework that balances the interests of stakeholders, including investors, businesses, and the government. By exploring the challenges and opportunities presented by digital asset taxation, the study contributes to informed policymaking that can adapt to the unique characteristics of cryptocurrencies. It also highlights the importance of public awareness and education regarding tax obligations, which is essential for promoting compliance.

Ultimately, this research can serve as a foundational resource for policymakers, academic scholars, and industry practitioners, paving the way for a more structured approach to digital asset taxation that supports Nigeria's economic growth and integration into the global digital economy.

1.7   SCOPE OF THE STUDY

The Study Is Restricted to Exploring The Taxation Of Cryptocurrencies And Digital Assets In Nigeria

1.8 LIMITATION OF STUDY

The exploration of the topic in relation to Nigeria is bound to suffer from some limitations. The first of them will be related to the dynamic nature of the cryptocurrency market. In other words, there might appear discrepancies between the current state of affairs and research findings since new technologies develop quickly, thus requiring additional frameworks and approaches to taxation of cryptocurrency. Moreover, there is not enough statistical data in relation to digital currency transactions and taxation issues in Nigeria. It means that a number of cryptocurrency transactions are made using anonymous accounts; therefore, analyzing them is quite problematic.

The next important challenge is associated with insufficient knowledge of key participants in the process. For instance, some people will have difficulties understanding what consequences taxation will bring to their operations. Similarly, tax authorities and businesses are not likely to have clear information in this respect, hence complicating the analysis further. Finally, there is always a question of legality since Nigeria does not have appropriate policies regulating the use and transactions with digital currencies. Thus, legal and regulatory limitations should not be underestimated.

1.9 OPERATIONAL DEFINITION OF TERMS

CRYPTOCURRENCIES: A cryptocurrency, crypto-currency, or simply crypto, is an electronic form of money that was intended to operate as a means of exchange on a computer-based network that does not need any central authority for its maintenance and stability. This is because, in terms of finances, it has emerged into a completely new asset class.

TAXATION: In simple words, a tax is an involuntary charge imposed on taxpayers by a government or any other governmental agency for collective expenditure on government or as a measure of reducing externality.

CHAPTER TWO

LITERATURE REVIEW

2.1 INTRODUCTION

This section presents a review of works of different authors around the world on various areas of interest for the study based on and guided by the stated objectives to be investigated by the current study. However, the chapter also presents a summary of literature review

2.2 THEORETICAL FRAMEWORK

2.2.1 ECONOMIC THEORY OF TAXATION