The International Monetary Fund (IMF) warned that Nigeria’s eNaira could pose money laundering risks, despite previously stating that the central bank digital currency (CBDC) was safer than bitcoin and other cryptocurrencies.
According to an IMF consultation published this month, using the eNaira for cross-border payments carries the risk of laundering money and financing terrorism. As such, the IMF encouraged Nigeria’s central bank to conduct broad-based risk assessments alongside its current anti-money laundering and combating the financing of terrorism protocols.
Nigeria’s CBDC uses a tiered customer identification model with strict daily transaction limits for each tranche. Customers in the lowest tier, which covers the unbanked population, can only spend the equivalent of $120 per day. The upper tiers have daily limits between $487 and $2,438.
Apart from money laundering risks, the IMF’s report also highlighted cybersecurity concerns associated with Nigeria’s CBDC.
The Central Bank of Nigeria (CBN) introduced the eNaira in October 2021 after banning banks from servicing crypto exchanges earlier in the year. In the first month, the CBN claimed almost 500,000 customers had downloaded the digital currency wallet with close to 80,000 merchant subscribers in tow.
Adoption has slowed significantly since the initial launch with only 188 million naira ($450,000) in total transactions during the first three months. In comparison, China’s e-yuan CBDC was doing upwards of $315,000 in daily transactions during this year’s Winter Olympics, according to Reuters.