By Ikenna Egwuatu-Elem
The International Monetary Fund has warned that Nigeria’s booming cryptocurrency market could expose the country to increased risks of money laundering and illicit financial activities if regulatory oversight remains inadequate.
The warning comes as Nigeria recorded an estimated $59 billion in crypto asset inflows between July 2023 and June 2024, reinforcing its position as one of the world’s largest digital asset markets.
In a report titled “Stablecoins in Nigeria: A Growing Cross-Border Channel,” authored by IMF Mission Chief for Nigeria, Axel Schimmelpfennig, and economist Bo Zhao, the institution said the rapid migration of financial transactions from traditional banks to digital wallets and crypto exchanges presents fresh challenges for regulators.
According to the IMF, existing monitoring systems were primarily designed for conventional financial institutions and may struggle to effectively track crypto-based transactions.
“Activity that once flowed through banks is moving increasingly to digital wallets and crypto exchanges. Monitoring systems designed for traditional intermediaries may not capture these transactions effectively. The speed and anonymity of some platforms can also increase risks of illicit finance, including money laundering,” the IMF stated.
Nigeria Emerges As A Global Crypto Powerhouse
The report noted that Nigeria has become one of the leading cryptocurrency markets globally.
According to the IMF, Nigeria ranked second globally on Chainalysis’ 2024 Global Crypto Adoption Index and moved to sixth position in 2025.
The country also accounts for approximately 60 per cent of all stablecoin inflows into sub-Saharan Africa since 2019, highlighting the increasing role of digital dollar-linked assets in Nigeria’s financial ecosystem.
Why Nigerians Are Embracing Stablecoins
Stablecoins, digital assets typically pegged to the US dollar, have become increasingly popular among Nigerian households and businesses because they offer faster and cheaper alternatives for cross-border payments.
Many Nigerians now use them to receive remittances, pay international suppliers and protect their savings against inflation and currency depreciation.
“The appeal is straightforward. Stablecoins allow users with a smartphone and internet access to receive remittances or make cross-border payments in minutes, often at lower cost than traditional channels,” the IMF stated.
The report said difficult economic conditions, including elevated inflation, persistent naira depreciation and limited access to foreign exchange during 2023 and 2024, accelerated adoption across the country.
For many users, stablecoins have become both a financial safety net and a practical way to access dollar-denominated assets.
IMF Warns Of Digital Dollarisation
Beyond money laundering concerns, the IMF warned that widespread use of dollar-backed stablecoins could gradually weaken the naira by creating a digital version of dollarisation.
According to the institution, excessive reliance on stablecoins could reduce demand for Nigeria’s local currency and weaken the effectiveness of monetary policies.
“One is monetary sovereignty. As stablecoins are typically denominated in U.S. dollars, widespread use can resemble a digital form of dollarisation. By reducing demand for the local currency, it could weaken the transmission of domestic monetary policy,” the report stated.
IMF Recommends Four Key Actions
Despite the risks, the IMF acknowledged that stablecoins offer several benefits, including lower transaction costs, faster payments, improved financial inclusion and stronger support for trade and remittances.
Instead of restricting their use, the Fund recommended a balanced approach focused on four key priorities:
- Strengthen macroeconomic reforms and restore confidence in the naira.
- Expand regulatory oversight for crypto assets and stablecoin issuers.
- Improve data collection and monitoring systems for crypto transactions.
- Invest further in payment infrastructure to reduce dependence on less-regulated alternatives.
The IMF also praised Nigeria’s progress in digital payments and participation in regional initiatives such as the Pan-African Payment and Settlement System.
However, it stressed that improving affordability, speed and interoperability across payment systems will be essential to reducing excessive reliance on crypto channels.
Analysts say Nigeria’s challenge will be finding the right balance between encouraging financial innovation and safeguarding the country’s financial stability.
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