Abstract

Stablecoins have become a critical element of the cryptocurrency ecosystem, offering benefits such as value stability, efficient cross-border transactions, and enhanced access to Decentralized Finance (DeFi) and everyday payment systems. Their increasing adoption demonstrates their capacity to transform financial processes by enabling faster transactions, reducing fees through blockchain technology, and expanding financial inclusion for unbanked populations. However, these advantages come with significant national security concerns, including the risks of illicit financial activities, gaps in regulatory oversight, and potential disruptions to monetary policy. This article explores the implications of stablecoins for Nigeria’s national security, focusing on their usage, regulatory challenges, and associated risks. It highlights vulnerabilities such as the potential for market manipulation, exploitation by criminal networks, and the use of stablecoins for money laundering, cyberattacks, and other illicit financial activities. The article also examines how these risks could undermine financial stability and national security, particularly in a context of limited regulatory capacity. By drawing lessons from global regulatory frameworks, the study stresses the urgent need for Nigeria to develop robust regulatory measures to address these risks and ensure financial stability. It calls for a balanced approach that promotes innovation while safeguarding the integrity of the financial system.

Keywords: Cryptocurrencies, Stablecoins, National security, Nigeria