CBN warns stablecoins could fuel FX volatility as digital payments expand
The Governor of the Central Bank of Nigeria, Olayemi Cardoso, has raised fresh concerns that the rapid rise of private digital payment platforms and stablecoins may amplify exchange rate instability and weaken monetary policy effectiveness in emerging economies.
Speaking at the G-24 Technical Group Meeting in Abuja, Cardoso cautioned that while financial technology innovation offers transformative opportunities, regulators must carefully manage the macroeconomic risks embedded in cross-border digital transactions.
The apex bank chief’s remarks come amid growing domestic and global interest in digital assets, particularly stablecoins — cryptocurrencies typically pegged to major currencies such as the US dollar — which are increasingly used for remittances, cross-border trade and investment flows.
Stablecoins and FX volatility risks for emerging markets
Addressing policymakers and development finance experts, Cardoso warned that stablecoins and FX volatility risks could become intertwined if adoption accelerates without regulatory coordination.
He noted that private digital currencies could encourage currency substitution, reduce the effectiveness of domestic monetary policy transmission, and expose emerging markets to capital flow pressures.
“The expansion of private digital payment platforms and stablecoins raises concerns about weakened monetary transmission, heightened FX volatility, systemic risks from non-bank payment providers, and regulatory fragmentation,” he said.
For developing economies like Nigeria, such disruptions could complicate exchange rate management and undermine hard-won macroeconomic stability.
Cross-border payment inefficiencies persist
Cardoso observed that cross-border payment systems remain slow, costly and fragmented, especially for emerging and developing economies. According to him, global remittance corridors still average costs above six per cent, with settlement delays stretching over several days.
These inefficiencies translate into higher transaction costs for families receiving remittances and small businesses seeking access to international markets. The governor argued that digital infrastructure — including instant payment systems, interoperable platforms and distributed ledger technologies — could reduce these frictions if implemented with robust governance frameworks.
However, he stressed that innovation must not outpace regulatory safeguards. Without coordinated oversight, digital cross-border payments could entrench dominant currencies and platforms, reduce interoperability and marginalise smaller economies.
Nigeria’s digital reform push
Cardoso highlighted steps already taken by the Central Bank of Nigeria to modernise the country’s payment ecosystem. These include tighter oversight of switching companies and payment service providers, stronger anti-money laundering controls in agent banking, and enhanced interoperability across financial channels.
He disclosed that the apex bank is finalising its Payment System Vision 2028, a strategic blueprint aimed at deepening innovation, resilience and financial inclusion while improving cross-border transaction efficiency.
In June 2025, Nigeria introduced the National Payment Stack — a real-time payment infrastructure built on ISO 20022 messaging standards to enable multi-currency and cross-border transactions.
Reforms in the remittance sector have also gained traction. Initiatives such as the Non-Resident Nigerian Ordinary Account and the Non-Resident Nigerian Investment Account now allow diaspora Nigerians to remit funds and invest domestically with greater ease.
The introduction of a Non-Resident Bank Verification Number platform further enables account opening and servicing from abroad.
According to the governor, these measures have lifted remittance inflows to an average of about $600m per month, with projections pointing toward a potential $1bn monthly threshold.
Balancing innovation and sovereignty
Despite these gains, Cardoso reiterated that stablecoins and FX volatility remain central policy concerns. In highly dollarised digital environments, stablecoins pegged to foreign currencies could weaken domestic currency demand, reducing central banks’ control over liquidity conditions.
He emphasised that central banks must modernise payment systems while safeguarding monetary sovereignty. Failure to coordinate regulatory standards across jurisdictions, he warned, could fragment global payment networks and undermine financial stability in emerging markets.
Nigeria’s position aligns with broader calls among G-24 member states for reforms within the global financial architecture. Cardoso reaffirmed collaboration with multilateral institutions such as the International Monetary Fund and the World Bank Group to foster a resilient and inclusive system.
Policy continuity amid digital transformation
Earlier policy signals from the Federal Government also underscored the importance of vigilance. In September 2025, President Bola Tinubu directed financial regulators to monitor the expanding use of stablecoins and digital currencies, noting the potential challenges posed by shifts away from traditional banking channels.
Cardoso’s latest remarks reinforce that stance, positioning the CBN as both a promoter of digital financial innovation and a guardian of macroeconomic stability.
As digital finance accelerates globally, the policy debate in Nigeria is likely to intensify. The interplay between stablecoins and FX volatility will remain a focal point for regulators seeking to harness technology-driven growth without sacrificing monetary control.
For emerging markets navigating currency pressures and capital flow volatility, the message from Abuja was clear: innovation must be carefully calibrated to preserve financial stability and protect economic sovereignty.
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