The International Monetary Fund said Nigeria's surging stablecoin adoption is “testing the limits” of existing monetary and regulatory frameworks, as households and small firms increasingly use dollar-pegged digital tokens for cross-border payments.

Stablecoins have gained traction in Nigeria because they allow users with a smartphone and internet access to receive remittances or make cross-border payments in minutes, often at lower cost than traditional channels, the IMF said in a report on Tuesday. 

The average cost of sending $200 to sub-Saharan Africa remains around 9% of transaction value, well above the global average of 6%, the organization added, citing the World Bank. 

According to the report, domestic conditions also accelerated the shift to stablecoins in 2023 and 2024. A sharp depreciation of the naira, persistent inflation, and limited access to official foreign exchange pushed households and small firms toward dollar-linked assets to hedge currency risk and settle payments with overseas suppliers. 

But the same features that make stablecoins attractive also raise policy concerns. The IMF said widespread use of U.S. dollar-denominated stablecoins can resemble a digital form of dollarization, potentially reducing demand for the local currency and weakening the transmission of domestic monetary policy. 

The movement of activity from banks to digital wallets and crypto exchanges also complicates monitoring, and the speed and anonymity of some platforms can increase risks of illicit finance, including money laundering, per the report.   

The IMF said these risks are not unique to Nigeria but are more pronounced given the scale of adoption. Nigeria accounts for roughly 60% of sub-Saharan Africa's stablecoin inflows since 2019, according to the IMF.

The IMF also noted that attempts to suppress stablecoin use are likely to be only partly effective. A more durable approach, the organization said, is to allow innovation while managing risks through four priorities. 

These include safeguarding monetary stability through credible domestic currency policy, strengthening oversight by clarifying treatment of stablecoin issuers and aligning with international frameworks, improving data visibility through blockchain analytics and reporting on naira-stablecoin conversions, and upgrading payment infrastructure to reduce reliance on unregulated channels.

Globally, the total supply of dollar-pegged stablecoins has exceeded $295 billion, according to The Block’s data dashboard. Tether’s USDT accounts for about $186.5 billion of that total, while Circle’s USDC stands near $75 billion.

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