The International Monetary Fund (IMF) has issued a significant advisory to Nigeria, suggesting that the country requires global cryptocurrency trading platforms to either register or obtain licenses to operate. This recommendation is part of the IMF’s latest staff report, released following their 2024 Article IV consultation with Nigeria, according to the local publication Punch.
The IMF has stressed the importance of Nigeria establishing a comprehensive regulatory framework to govern its rapidly expanding cryptocurrency market. This step is seen as essential for ensuring financial stability and protecting investors by subjecting crypto exchanges to the same regulatory standards as traditional financial intermediaries.
Unrecorded Transactions and Balance of Payments Issues
The IMF report also pointed out significant discrepancies in Nigeria’s balance of payments, especially in net errors and omissions, which largely reflect unrecorded financial transactions. It has been suggested that these discrepancies are caused by the increased use of cryptocurrencies for cross-border transactions.
Preliminary data from 2023 indicates these unrecorded transactions continue to be substantial, representing about 2% of Nigeria’s gross domestic product.
The IMF’s consultation with Nigerian authorities revealed significant issues related to illicit financial flows through cryptocurrency platforms, which are exerting pressure on the country’s exchange rate.
Amid growing concerns about the potential for money laundering and terrorism financing through crypto platforms, the IMF highlighted the need for stringent anti-money laundering (AML) and combating the financing of terrorism (CFT) controls. The organization emphasized the importance of implementing effective risk-based supervision for crypto trading platforms and other virtual asset service providers.
Efforts to Attract FX Liquidity and Enhance Compliance
To address the volatility in the FX market, the Nigerian government has implemented reforms, including a new rule mandating international oil companies to retain 50% of their remitted oil receipts within Nigeria for 90 days.
This measure is aimed at addressing unregulated crypto activities’ challenges, as part of efforts to attract FX liquidity and ensure compliance with FX regulations.
Further, following concerns over potential currency manipulation by cryptocurrency platforms, the Nigerian Securities and Exchange Commission’s Director General, Emomotimi Agama, advocated for the delisting of the naira from peer-to-peer platforms to prevent further manipulation.
Also, last March, Nigerian authorities imposed a $10 billion fine on Binance, the largest crypto exchange by volume. This move came amid an investigation by the Office of the National Security Adviser (ONSA) into Binance’s operations
