IMF recommends Nigeria adopt crypto to tackle forex market woes

The International Monetary Fund (IMF) has recommended that Nigeria adopt the regulated use of digital assets by licensing international crypto exchanges.

This proposal, outlined in the IMF’s latest advisory report on Nigeria, aims to boost economic stability and improve the country’s position in the African crypto sector.

The proposal comes amid a recent regulatory crackdown on cryptocurrencies in Nigeria, which has included legal disputes with exchanges such as Binance and plans to ban peer-to-peer (P2P) trading.

The IMF suggests that licensing crypto exchanges could attract foreign investment and improve remittance processes, which is particularly important for Nigeria due to its sizeable foreign population. The recommendation emphasizes the importance of adhering to strict regulatory standards, including robust anti-money laundering and countering the financing of terrorism (AML/CFT) protocols.

В the recommendation The IMF also addressed Nigeria’s significant balance of payments gaps, which are partly due to undeclared financial activities, often facilitated by cryptocurrencies in cross-border transactions. The report argues that appropriate regulation and licensing can harness the potential of cryptocurrencies to ensure secure and efficient transaction processes, curb illicit financial activities, and reduce the risks of fraud and money laundering.

The IMF also highlights the potential of digital currencies to promote financial inclusion, particularly in Africa, by supporting economic growth and improving access to financial services for the unbanked population.

However, Nigeria has recently experienced a significant regulatory crackdown on P2P cryptocurrency trading, prompted by concerns about the volatility of the foreign exchange market. The Central Bank of Nigeria has pointed to speculative activities in crypto trading as a contributing factor to this volatility, singling out practices such as pump-and-dump schemes.

Crackdowns include actions against Binance such as regulators accuse exchange in facilitating untraceable transactions totaling $26 billion. This led to the arrest of Binance executives and the freezing of over 1,000 bank accounts related to P2P crypto transactions.