IMF warns that the widespread use of stablecoins in Nigeria is intensifying digital dollarization, weakening the efficiency of local currency policies
According to The Block, the International Monetary Fund (IMF) has stated that Nigeria's widespread adoption of a stablecoin pegged to the US dollar poses a challenge to the country's monetary policy and regulatory framework. The devaluation of the naira, high inflation, and limited access to official foreign exchange have driven local households and small and medium-sized enterprises to switch to stablecoins for cross-border payments and hedging against exchange rate risks. The IMF warns that the widespread use of stablecoins is exacerbating digital dollarization, weakening the demand for local currency and the efficiency of monetary policy transmission, and increasing the difficulty of anti money laundering and financial regulation. Since 2019, Nigeria has accounted for approximately 60% of stablecoin inflows in sub Saharan Africa. The IMF suggests addressing related risks by strengthening local currency stability, clarifying regulatory rules for stablecoin issuers, enhancing on chain data monitoring capabilities, and improving local payment infrastructure.
