IMF wants Nigeria to licence cryptocurrency trading platforms

Business a.m.

The International Monetary Fund (IMF) has recommended that the Nigerian government establish a registration or licensing framework for crypto trading platforms, including Binance, in response to the ongoing dispute with the world’s largest cryptocurrency platform.

This recommendation was part of the IMF’s latest staff report which followed the conclusion of its 2024 Article IV consultation with Nigeria. According to the report, the IMF emphasised that requiring global crypto trading platforms to register would subject them to regulatory requirements, ensuring better oversight and compliance with financial standards.

The Nigerian government has taken decisive action against Binance and other crypto-asset trading platforms, closing their operations due to allegations that these platforms were used by Nigerians to facilitate capital flight with untraceable funds and trader identities.

In addition to shutting down these platforms, the authorities allegedly revoked the licences of 4,173 Bureaux de Change (BDCs) for failing to comply with the Central Bank of Nigeria’s (CBN) accounting and reporting requirements.

In response to the situation, the IMF advised that global crypto trading platforms be registered or licensed in Nigeria and subject to the same regulatory requirements applicable to financial intermediaries following the principle of the same activity, same risk, and same regulation.

The IMF also urged the authorities to ensure the application of AML/CFT (Anti Money Laundering/Combating the Financing of Terrorism) preventive controls by crypto trading platforms.

The IMF highlighted the importance of establishing a strong regulatory framework in Nigeria to oversee the expanding cryptocurrency market. This, it explained, would ensure financial stability and protect investors, aligning with global efforts to standardise cryptocurrency regulations and prevent illicit activities.

The financial agency of the United Nations also acknowledged the significant steps taken by Nigerian authorities earlier this year to address issues surrounding cryptocurrency trading platforms.

The report reads in part: “The authorities agreed with the importance of maintaining external stability and emphasised that the reforms that they have implemented as well as efforts to bring in FX liquidity, including the requirement for international oil companies to hold 50 percent of repatriated oil receipts in Nigeria for 90 days, are geared towards that end.

“They see pressure on the exchange rate now coming from illicit flows, including through crypto-asset platforms, and not being driven by fundamentals, noting that some ceilings on FX access are intended to curb abuse.”

In February, Yemi Cardoso, the CBN governor, voiced concerns regarding the substantial volume of transactions passing through crypto exchange platforms from unidentified sources. 

He stated that the apex bank is collaborating with other government agencies to tackle these illicit financial activities.

The CBN also claimed that during the previous year, about $26 billion passed through Binance Nigeria from sources and users that could not be adequately identified. This revelation has since caused a ripple effect, placing cryptocurrency trading platforms under increased scrutiny over suspicions that they may be manipulating the local currency’s value in the foreign exchange market.

In line with ongoing efforts to regulate cryptocurrency transactions and combat financial crime in Nigeria, fintech companies such as OPay, MoniePoint, PalmPay, and others have been instructed to block the accounts of customers involved in cryptocurrency transactions and report those transactions to law enforcement agencies.