The International Monetary Fund (IMF) has recommended that Nigeria embrace the regulated use of digital assets by licensing international crypto exchanges.
In a recent consultation report for Nigeria, the IMF proposed this move to enhance the country’s economic stability and strengthen its position within the African crypto sector. This recommendation comes amidst a regulatory crackdown on crypto in Nigeria, including legal disputes with Binance and plans to ban peer-to-peer (P2P) trading.
The IMF’s report suggests that licensing crypto exchanges could attract foreign investment and improve remittance processes, which is especially important for Nigeria due to its large expatriate population. The IMF also emphasized the need for strict regulatory standards, including robust Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) protocols.
The report highlighted significant gaps in Nigeria’s balance of payments, with discrepancies reaching $7.5 billion, or about 2% of the country’s GDP. These gaps are often the result of undeclared financial activities, facilitated by cryptocurrencies in cross-border transactions. The IMF believes that proper regulation and licensing of cryptocurrencies can provide Nigeria with secure and efficient transaction processes, helping to curb illegal financial activities and reduce the risks of fraud and money laundering associated with digital currencies.
Furthermore, the IMF stated that digital currencies could promote financial inclusion and support economic growth by improving access to financial services for the unbanked population of Africa. However, recent regulatory actions in Nigeria have seen a crackdown on crypto and P2P trading due to concerns over speculative activities in the foreign exchange market.
The Central Bank of Nigeria has raised issues such as “pump-and-dump” schemes in the P2P trading sector, accusing traders of manipulating the naira through these strategies. Notably, Nigerian regulators have taken action against Binance, accusing the exchange of facilitating $26 billion in untraceable transactions. This led to the arrest of two executives and the freezing of over 1,000 bank accounts linked to P2P crypto transactions.
In response to these regulatory crackdowns, Nigeria’s crypto traders have reportedly moved their operations underground, using informal channels like WhatsApp and Telegram for P2P trading. They are also utilizing non-custodial or self-custody crypto wallets to continue their activities outside the realm of regulated exchanges.
