IMF: Nigeria Risks Rise in Illicit Finance, Money Laundering Amid $59bn Crypto Inflow

• Seeks stronger regulation, better oversight of digital asset transactions 

•Nigeria accounts for 60% of stablecoin inflows into sub-Saharan Africa

Emmanuel Addeh in Abuja

The International Monetary Fund (IMF) yesterday warned that Nigeria’s rapidly expanding use of stablecoins and other crypto assets, which attracted an estimated $59 billion in inflows between July 2023 and June 2024, could fuel illicit financing and money laundering if left inadequately regulated.

The Fund noted that while stablecoins have emerged as an important channel for cross-border payments, remittances and financial inclusion in Nigeria, their increasing use outside the traditional banking system poses significant risks to financial integrity and monetary stability.

In a publication titled “Stablecoins in Nigeria: A Growing Cross-Border Channel,” released Tuesday and authored by IMF Mission Chief for Nigeria, Axel Schimmelpfennig, and economist Bo Zhao, the institution stressed that the speed and relative anonymity of some digital asset platforms could make them attractive for illicit financial activities.

“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.

It disclosed that Nigeria received approximately $59 billion in crypto-asset inflows between July 2023 and June 2024, making it one of the world’s largest cryptocurrency markets. The country, it said, ranked second globally on Chainalysis’ 2024 Global Crypto Adoption Index and sixth in 2025.

It further noted that Nigeria accounts for about 60 per cent of stablecoin inflows into sub-Saharan Africa since 2019, underscoring the growing importance of digital dollar-linked assets in the country’s financial ecosystem.

The IMF explained that stablecoins, which are crypto assets typically pegged to the U.S. dollar, have become increasingly attractive to Nigerian households and businesses because they offer faster and cheaper cross-border transactions than conventional financial channels.

According to the report, many users have embraced the technology as a means of receiving remittances, paying overseas suppliers and protecting savings against 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 Fund pointed out that domestic economic conditions accelerated adoption, particularly during the period of sharp naira depreciation, elevated inflation and restricted access to foreign exchange in 2023 and 2024.

It argued that stablecoins offered Nigerians both a hedge against currency risks and a practical alternative for obtaining dollar-denominated assets.

However, beyond concerns about illicit finance, the IMF warned that widespread use of dollar-pegged stablecoins could evolve into a digital form of dollarisation, reducing demand for the naira and weakening the effectiveness of domestic monetary policy.

“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.

Nevertheless, the IMF acknowledged the benefits associated with stablecoin adoption, including lower transaction costs, faster settlement times, enhanced financial inclusion and support for trade and remittance flows.

Rather than attempting to suppress their use, the institution advocated a balanced policy approach that accommodates innovation while managing associated risks, identifying four priority areas for policymakers.

It urged authorities to sustain macroeconomic reforms and monetary policies that strengthen confidence in the naira, arguing that a stable domestic currency remains the strongest defence against digital dollarisation.

Besides, it called for stronger regulatory oversight, noting that Nigeria had already made progress through rules introduced by the Securities and Exchange Commission (SEC) for virtual asset service providers and guidance issued by the Central Bank of Nigeria (CBN) on interactions between banks and crypto-related businesses.

The Fund said regulators should now move to clarify the treatment of stablecoin issuers and align domestic regulations with emerging global standards.

In the same vein, the IMF emphasised the need for improved data collection and monitoring of crypto transactions, especially at points where stablecoins interact with Nigeria’s financial system.

“Combining blockchain analytics with reporting on naira-stablecoin conversions would help regulators identify risks early and respond more effectively,” the report noted.

The IMF therefore recommended continued investments in payment infrastructure, arguing that many of the factors driving stablecoin adoption stem from deficiencies in existing cross-border payment systems.

While acknowledging Nigeria’s progress in instant domestic payments and participation in regional initiatives such as the Pan-African Payment and Settlement System (PAPSS), the IMF maintained that further improvements in speed, affordability and interoperability would reduce dependence on less regulated channels.