IMF supports Nigeria’s crypto adoption amid local SEC crackdown

The International Monetary Fund (IMF) has recommended that Nigeria license international cryptocurrency exchanges as part of economic reform measures.

According to a recent IMF report, the bid to integrate cryptocurrencies into the financial system is aimed at securing Nigeria's position in the African cryptocurrency market. “Global Crypto Exchanges recommend that they be registered or licensed in Nigeria and subject to the same regulatory requirements applicable to financial intermediaries.

It says: “Authorities must ensure the implementation of AML/CFT [Anti-Money Laundering and Countering the Financing of Terrorism] Effective AML/CFT risk-based regulation is regulated by crypto trading platforms and other virtual asset service providers.

The report pointed to the disparity in Nigeria's balance of payments, particularly net errors and unrecorded transactions. These differences are due to a number of factors, including the fact that the “transfer of using crypto-assets for cross-border transactions” is often not recorded in traditional bank records.

Previously positive in 2020, the report shows preliminary 2023 data, which “NEOs continue to be a very large negative” at nearly $7.5 billion – 2% of Nigeria's GDP.

The IMF suggests that Nigeria can attract international investment, stabilize financial markets, and improve currency exchange by controlling and licensing large-scale remittances due to the Nigerian diaspora.

The IMF-endorsed adoption of cryptocurrency comes at a time when Nigeria is facing severe macroeconomic challenges; For example, currency instability and inflation. With the cryptocurrency exchange license, the IMF aims to use cryptocurrencies as a tool for stable and efficient transaction processes.

This could improve Nigeria's governance of digital financial activity, reduce illicit money flows and reduce fraud and money laundering risks associated with cryptocurrency transactions.

The latest evidence of this regulatory shift can be seen in the regulation by the Nigerian Securities and Exchange Commission designed to ban peer-to-peer (P2P) cryptocurrency exchanges using the Nigerian national currency, the naira.

Nigeria's SEC director-general, Imomotimi Agama, pointed out that the ban was aimed at preventing the use of the nara after it “affects the naira exchange rate”.

However, a ban on P2P cryptocurrency payments is a task previously considered almost impossible by industry advocates.