KPMG has urged Nigerian banks to integrate blockchain technology and collaborate with cryptocurrency firms, as global adoption increases amid evolving regulatory frameworks. The report highlights Nigeria’s significant contributions to global crypto inflows and discusses challenges such as scams and compliance risks. It underscores the potential of blockchain to enhance banking efficiency and competitiveness.
KPMG has formally urged Nigerian financial institutions to adopt blockchain technology and collaborate with cryptocurrency firms. This call for action is founded on the increasing global acceptance of cryptocurrency and the evolving stance of Nigerian regulatory bodies towards the sector. KPMG’s report, titled “Crypto Risk and Opportunities in Nigeria: A New Banking Paradigm,” examines the implications of the Central Bank of Nigeria’s (CBN) ban on crypto transactions enacted in 2021.
The report utilizes data from Chainalysis, indicating that despite the ban, Nigeria’s share of global crypto inflows saw a notable increase. Between July 2023 and June 2024, Sub-Saharan Africa registered $125 billion in on-chain crypto transactions, with Nigeria contributing $59 billion. The high costs associated with traditional remittance systems have prompted Nigerians, including those abroad, to leverage cryptocurrency for expedited and cost-effective cross-border payments.
The resilience of the cryptocurrency sector in Nigeria has been highlighted by a robust 25% rebound in inflows during 2024. However, factors such as penalties for banks that breached CBN regulations and instances of currency devaluation have also played a role in shaping adoption dynamics. On the downside, the prevalence of crypto-related scams persists as a critical issue, with global scam activity generating $10 billion in 2024. KPMG warns that these risks necessitate heightened vigilance amid ongoing regulatory responses.
In light of the sector’s resilience, Nigerian regulatory bodies have begun adjusting their strategies. The introduction of the CBN’s Virtual Asset Service Providers (VASPs) guidelines and the SEC’s Accelerated Regulatory Incubation Program (ARIP) reflect a trend towards more proactive engagement and clearer regulatory frameworks. KPMG notes that the integration of blockchain technology offers transformative possibilities for Nigerian banks, including enhanced compliance measures and increased operational efficiency.
The report emphasizes that, “Forward-thinking banks can position themselves at the forefront of an increasingly digital financial system by leveraging blockchain technology.” KPMG affirms that these advancements can significantly enhance competitiveness within the rapidly evolving digital economy. Additionally, the report draws attention to the increasing sophistication of fraudsters in cryptocurrency transactions, highlighting concerns raised by the EFCC regarding training of young Nigerians in these illicit practices.
In conclusion, KPMG advocates for Nigerian banks to embrace blockchain technology and collaborate with cryptocurrency firms as a strategic response to the global shift towards digital finance. The insights presented underscore the potential benefits of integration for compliance and operational efficiency, as well as the urgent need for vigilance against fraud within the sector. As Nigerian regulators streamline their approaches, the emphasis on blockchain could foster a more dynamic and resilient financial landscape in Nigeria.
Original Source: nairametrics.com
