IMF warns enaira could reduce demand for commercial bank deposits

The International Monetary Fund (IMF) has warned that the eNaira portfolio could reduce “the demand for deposits in commercial banks”.

This was disclosed in an IMF report titled: “Country Focus; Five observations on the digital currency of the central bank of Nigeria. ‘

The IMF has advised the Central Bank of Nigeria (CBN) to address the many risks associated with digital currency, especially the vulnerabilities it poses to monetary policy execution and cybersecurity.

Read: CBN will not bear losses caused by eNaira site

What the report says

The world body said, “Like digital currencies elsewhere, eNaira carries risks for the implementation of monetary policy, cybersecurity, operational resilience, and financial integrity and stability.

“For example, eNaira wallets can be perceived, or even function effectively, as a deposit at the central bank, which can reduce the demand for deposits in commercial banks.

“By leveraging digital technology, there is a need to manage cybersecurity and operational risks associated with eNaira. “

Read: Buhari says eNaira will increase Nigeria’s GDP by $ 29 billion in 10 years

To mitigate potential risks, the IMF said action has been taken. The report said:

“The authorities have taken steps to manage the risks. The transfer of funds from bank deposits to eNaira wallets is subject to daily transactions and balance limits in order to mitigate the risks of diminishing role of banks and other financial institutions.

“Financial integrity risks, such as those resulting from the potential use of eNaira for money laundering, are mitigated by using a multi-layered identity verification system and by applying more stringent controls to relatively less verified users. “

Read: Amid crypto crackdown, CBN’s eNaira attracts 78,000 traders from over 160 countries

Due to the size and complexity of the Nigerian economy, the launch of digital currency has attracted interest from the international community and other central banks, according to the IMF.

The eNaira, according to the organization, is based on the same blockchain technology as Bitcoin and Ethereum, but it is not a financial asset. The IMF also noted that the e-Naira will improve financial inclusion, make it easier to send remittances and reduce informality.

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