IMF warns that using stablecoins may weaken Naira

The International Monetary Fund (IMF) has raised concerns that the rising use of US dollar-backed stablecoins in Nigeria could hurt the demand for the naira. This might also affect how effective the country’s monetary policy is.

In a report called “Stablecoins in Nigeria: A Growing Cross-Border Channel” released on Tuesday, the IMF highlighted that the growing use of stablecoins poses risks to Nigeria's control over its currency. More people and businesses are turning to these digital dollar-linked assets for saving and making payments.

This warning comes as Nigeria ranks among the top crypto markets globally. The country saw about $59 billion in crypto-asset inflows between July 2023 and June 2024. This made Nigeria second in the world according to Chainalysis’s 2024 Global Crypto Adoption Index and sixth in 2025.

Since 2019, Nigeria has also been responsible for around 60 percent of stablecoin inflows into sub-Saharan Africa.

The IMF acknowledged that stablecoins have their advantages, especially in making cross-border payments cheaper and faster. But the organization cautioned that the rising popularity of these assets could lead to bigger economic issues for Nigeria’s monetary policy.

The IMF also mentioned that stablecoins bring risks to the country's financial system. The speed and anonymity of some platforms could help in illegal activities, including money laundering.

“One is monetary sovereignty. As stablecoins are typically denominated in US dollars, widespread use can resemble a digital form of dollarization. By reducing demand for the local currency, it could weaken the transmission of domestic monetary policy.

“Another concern is financial integrity. 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 said.

Despite these dangers, the IMF recognized that stablecoins provide real benefits, especially for families and small businesses that struggle with formal banking services.

Stablecoins help users receive remittances and make international payments faster and more easily.

To tackle the risks of digital dollarization, the IMF urged policymakers to keep the economy stable and build trust in the local currency.

“First, safeguard monetary stability. The most effective defense against digital dollarization is a stable and credible domestic currency.

“Nigeria’s recent macroeconomic reforms and tighter monetary policy have helped restore confidence in the naira. Sustaining this progress will be critical.”

The IMF also called for better regulation of the digital asset space. They want Nigeria to adapt regulatory frameworks from places like the European Union, Singapore, Hong Kong, Japan, and the United States to fit local needs.

“Second, strengthen oversight. Nigeria has taken steps in this direction, including the Securities and Exchange Commission rules for virtual asset service providers and CBN guidance on their interaction with banks.

“The next step is to clarify the treatment of stablecoin issuers and align domestic rules with emerging international frameworks, such as those in the European Union, Singapore, Hong Kong, Japan, and the United States, while adapting them to local conditions,” the Fund said.

Additionally, the IMF emphasized the need for better data on stablecoin use and improvements in payment systems to reduce reliance on unregulated channels. This will also help regulators see digital asset transactions clearly.

The IMF pointed out that while the issues tied to stablecoins are global, Nigeria's high level of adoption makes the risks more serious and needs careful policy focus.

Stablecoins are digital currencies linked to the US dollar or other fiat currencies, acting as an important financial tool in Nigeria.

The report mentioned that several reasons are behind the growing use of stablecoins in Nigeria. The sharp fall of the naira in 2023 and 2024, high inflation, and limited access to foreign exchange have increased the need for dollar-linked assets. Stablecoins provide a way to protect against currency risks and pay foreign suppliers.

The IMF also noted that since the Central Bank of Nigeria (CBN) stopped banks from working with crypto exchanges in February 2021, many crypto activities moved to less regulated areas, especially peer-to-peer platforms.

The report explained that stablecoins are becoming more appealing worldwide because they are relatively stable, easy to transfer, and widely accepted in crypto markets. In Nigeria, economic challenges have made them even more attractive.