The International Monetary Fund (IMF) has put forward a proposition urging Nigeria to embrace regulated usage of digital assets by granting licenses to international cryptocurrency exchanges. This recommendation, articulated in the IMF's recent consultation report for Nigeria, seeks to fortify the nation's economic stability and its standing within the African cryptocurrency landscape.

The IMF's proposal entails licensing these platforms to attract foreign investment and streamline remittance processes, crucial for Nigeria given its substantial expatriate community. Emphasis is placed on stringent regulatory standards, encompassing robust Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) protocols to ensure compliance.

The consultation report underscores significant imbalances in Nigeria's balance of payments, approaching $7.5 billion or approximately 2% of the country's GDP, largely attributed to undeclared financial activities facilitated by cryptocurrencies in cross-border transactions. The IMF contends that proper regulation and licensing can furnish Nigeria with mechanisms for more secure and efficient transactional frameworks, thereby augmenting oversight over digital financial transactions, mitigating illicit financial activities, and diminishing the risks of fraud and money laundering associated with digital currencies.

Moreover, the report accentuates the potential of digital currencies to foster financial inclusion and bolster economic growth, particularly by ameliorating access to financial services for Africa's unbanked population.

However, Nigeria has recently grappled with a substantial regulatory crackdown on cryptocurrency and peer-to-peer (P2P) trading, spurred by apprehensions surrounding volatility in the foreign exchange market attributed to speculative maneuvers in crypto trading. The Central Bank of Nigeria has voiced concerns over activities such as "pump-and-dump" schemes in P2P trading, alleging traders of manipulating the naira through speculative strategies.

This regulatory crackdown has precipitated actions against Binance, with Nigerian regulators accusing the exchange of facilitating $26 billion in untraceable transactions, resulting in the apprehension of two executives and the freezing of over 1,000 bank accounts linked to P2P crypto transactions. Consequently, Nigerian crypto traders have purportedly shifted operations clandestinely, resorting to informal channels such as WhatsApp and Telegram for P2P trading, utilizing non-custodial or self-custody crypto wallets to circumvent activities outside the purview of regulated exchanges.