Central Bank of Nigeria Sets New Licensing Rules for Stablecoins

On November 5, the Central Bank of Nigeria issued new licensing and capital requirements for volatile virtual assets. The new regulation includes licenses for stablecoins pegged to the naira and foreign currencies, and outlines obligations for reserves, capital, and local presence, prohibiting certain algorithmic structures.

The regulator distinguishes between two classes of stablecoins: class 1 for tokens pegged to the naira, with minimum capital requirements of 10 billion naira, and class 2 for tokens pegged to foreign currencies, with a minimum capital of 15 billion naira. The bank has the authority to set higher requirements. Each token will also require approval, and the rules mandate the provision of information on reserves, redemption processes, and risk management. According to the terms, the rules apply to all regulated activities conducted in Nigeria or from Nigeria, targeting residents of the country, or significantly impacting the country's financial system. Therefore, international stablecoin issuance platforms must also consider local licensing rules before targeting the market.

The new regulatory framework includes compliance checks for anti-money laundering requirements, transaction monitoring, and customer protection. While these obligations may be costly for smaller companies, the regulator emphasizes the priority of consumer protection and the integrity of the financial system alongside innovation. Transitional provisions are provided for existing operators. The final check for users will be the ability to reliably redeem licensed products and transparent fees, while for issuers, it is important to comply with reserve and management conditions while maintaining an efficient economy.