CBN moves to regulate stablecoin issuers and P2P exchanges

The Central Bank of Nigeria has published a new set of rules to govern the issuance and use of stablecoins, primarily with the aim of bringing stablecoins under Nigeria's foreign exchange control regime. The policy document published on Nov. 5 took effect on the same day. 

What it says: Under the new laws, foreign currency-pegged stablecoins now have express permission to be used for cross-border payments and international trade settlements, but with restrictions. 

• Transactions across borders made with stablecoins will be subject to the same eligibility, reporting and settlement requirements as traditional foreign exchange channels. 
• Issuers of naira stablecoins are mandated to open physical offices within the country.  
• On the other hand, foreign currency stablecoins approved by the CBN can only be made available to the market by licensed Nigerian entities, relieving the issuers of the compulsory burden to set up shop in the country. 
• The document also brings peer-to-peer exchanges under the regulatory purview of the CBN, rescinding the blanket ban placed on such platforms since 2024. 
• P2P exchanges can now secure approval from the CBN. Requirements include the maintenance of systems capable of linking the crypto leg of a transaction with the corresponding naira payment. 
• In addition, the naira leg must be settled via a Nigerian banking channel approved by the CBN, and the names and bank verification numbers must be double-checked. 

But: The capital and reserve requirements for stablecoin issuance are substantial.  

• According to the CBN, issuers of naira stablecoins must hold 10 billion naira, and foreign stablecoins, 15 billion naira, as the minimum required paid-up capital. 
• This is on top of the Nigerian Securities and Exchange Commission (SEC's) capital requirement for licensing these firms. 
• In addition, foreign currency stablecoin issuers are required to maintain additional operational liquidity of not less than 10 million USD and enough funds to meet 30 days of redemption obligations. 
• Issuers must maintain reserves at par with the number of tokens they issue plus a 2% overcollateralization buffer to absorb spikes in valuation and make up for operational costs. 
• At least 40% of this total reserve pool must be held in cash or highly liquid assets. Local issuers must maintain an additional 20% cash reserve with the CBN, the rulebook added. 

What this means: Nigeria joins a growing list of jurisdictions around the world instituting stablecoin-specific rules considering the asset class's growing popularity as a vehicle of money transfer across borders. 

• In keeping with a broader trend, the newly enacted policy document seemingly blurs lines between crypto and traditional fintech, choosing to subject both crossborder payment rails to similar rules. 
• Capital requirements can create a barrier of entry, but not if the regulators deliberately want to only cater to institutional-grade issuers and leave out the competition.