IMF Urges Nigeria to Regulate Stablecoins Without Stifling Innovation

What to Know

• The IMF has warned that rising use of US dollar-backed stablecoins in Nigeria could threaten monetary sovereignty and increase “digital dollarization.”
• The Fund wants stablecoins and crypto activities brought under stronger regulatory supervision. 
• Nigeria remains one of the world’s most active crypto markets, with strong adoption of dollar-backed digital assets. 
• Industry advocates argue the debate should focus on balanced regulation rather than restriction. 
• The discussion highlights a growing tension between financial innovation and monetary control.

In its 2026 Article IV consultation report on Nigeria, the International Monetary Fund (IMF) has raised concerns about Nigeria’s growing reliance on US dollar-backed stablecoins. The IMF warns that the rising adoption of USD-backed stablecoins could undermine the country’s monetary sovereignty. 

The IMF’s Warning

In its latest assessment, the IMF flagged the increasing use of dollar-denominated stablecoins, primarily USDT and USDC, as a potential threat to Nigeria’s ability to manage its own monetary policy.

The IMF’s core concern is digital dollarisation. Digital dollarisation is the adoption of US dollar-pegged stablecoins and digital dollars by individuals and businesses, particularly in emerging economies like Nigeria. 

Digital dollarisation happens when people and businesses hold value in these dollar-backed digital assets rather than the local currency, in this case, the Naira. It often occurs outside the traditional and domestic banking system.

When digital dollarisation occurs at scale, demand for the local currency declines. Central bank policy tools such as interest rates, money supply management, and exchange rate interventions become less effective. Capital flows become harder to track and control.

The IMF has raised concerns about this across multiple emerging markets, but Nigeria’s scale of adoption makes it a particular focus.

Why Nigerians Are Choosing Stablecoins

The IMF’s concern is not unfounded.

In 2025, Nigeria ranked sixth on Chainalysis’ Global Crypto Adoption Index. The year before, between July 2023 and June 2024, Nigeria ranked second, pulling in $59 billion in crypto transaction value. During that period, stablecoins accounted for 65% of inflows. 

In its 2025 report, YellowCard, one of the largest licensed stablecoin infrastructure providers in Africa, noted that Nigeria led global stablecoin adoption. Per the report, Nigeria has around 25.9 million digital asset users with a strong preference for USD-backed stablecoins. 

Nigeria has faced persistent naira depreciation and high inflation. Low trust in the Naira and the country’s economic reforms have made dollar-denominated assets an attractive store of value.

Beyond that, stablecoins offer faster, cheaper cross-border payments than traditional banks.

In 2023, remittance flows to Nigeria reached over $19 billion, accounting for over 35% of the total inflow to Sub-Saharan Africa. Using stablecoins, settlement costs for remittances are significantly lower than conventional channels.

Stablecoin adoption in Nigeria isn’t an economic story.

Monetary Sovereignty at Stake

Monetary sovereignty is the ability of a government to control its own currency and use monetary policy to manage economic conditions.

When a significant portion of economic activity shifts to a foreign currency, like from Nigeria to USD or USD-backed stablecoins, that control is weakened. 

In its report, the IMF notes that Nigeria launched its first regulated stablecoin (cNGN) pegged 1:1 to the naira. Adoption of the cNGN is poor. As of early 2025, only 66 million cNGN (roughly US$44 thousand) have been issued, and only 74 on-chain transactions have been recorded.

Nigeria is already navigating significant currency pressure. The IMF’s specific concerns are that stablecoins will facilitate currency substitution, reducing naira demand. It is also concerned about the weakened transmission of central bank policy decisions, challenges in managing capital flows, and the potential disintermediation of Nigeria’s banking sector.

The Counterargument: Regulate Smarter, Not Harder

Critics of heavy-handed regulatory approaches point out that the same features that drive IMF concern also deliver real economic value. Financial inclusion, lower remittance costs, faster payments, and improved access to global commerce are not marginal benefits in a country where millions remain underserved by traditional finance.

In its report, the IMF urges Nigeria to build confidence in the Naira, clarify its stance on dollar-denominated stablecoins, and create a regulatory framework that addresses the underlying driver of USD-backed stablecoin adoption within the country. 

Nigeria needs to build a framework that addresses the genuine risks without destroying the utility that made adoption inevitable in the first place. The IMF also warns against overly restrictive rules, as they don’t eliminate the use of stablecoins. They just push them further into informal sectors.

Where Nigeria Stands Regulatorily

Nigeria has been moving toward structured digital asset oversight, if gradually. The Securities and Exchange Commission (SEC) has taken steps to define its role in crypto markets.

The country has also been developing a Virtual Asset Service Provider framework. A crypto regulation bill recently advanced to a second reading in the National Assembly.

A Continental Debate

Nigeria isn’t navigating this topic alone. South Africa is grappling with stablecoin concerns tied to exchange controls. Kenya is in active regulatory consultation. Zimbabwe has introduced a crypto registration framework.

Across the continent, governments are arriving at roughly the same conclusion. The landscape has shifted from whether governments should allow virtual assets to whether they should regulate them as part of their economic activity. The time has come to bring them into the fold and set up terms under which they operate.

What a Workable Framework Might Include

Analysts and industry stakeholders broadly agree on several building blocks for balanced stablecoin regulation.

There would need to be oversight of stablecoin issuers operating in or serving Nigerian users, reserve transparency requirements, robust AML and KYC controls, consumer protection standards, and clearer reporting obligations for exchanges and wallets.

The challenge is calibrating those requirements so they address systemic risk without creating compliance costs that render legitimate services unviable or push users toward offshore platforms with no regulatory accountability.