Nigeria to regulate stablecoins and ICOs

By: Henry Felix

Nigeria to regulate stablecoins and ICOs

January 11, 2023 6:54 AM

The newest policy document from the Central Bank of Nigeria underlined the importance to build a legal framework for stablecoins.

As one of the world’s pioneers in implementing its own central bank digital currency (CBDC), Nigeria also expresses its preparedness to tolerate the existence of private stablecoins. The imperative to build a legal framework for stablecoins is emphasized in the latest central bank policy paper.

The 83-page paper from the Central Bank of Nigeria (CBN) is titled "Nigeria Payments System Vision 2025" and discusses the creation of a regulatory framework for the possible use of stablecoins. Given that stablecoins are likely to become a viable payment system in the country, the document lays out the necessity to build a framework.

The paper also discusses how ICOs should be governed (ICOs). It sheds light on the fact that there is currently a regulatory vacuum in the sector, which is leading to losses for investors. The CBN, on the other hand, thinks that initial coin offerings (ICOs) could be used as a novel method of financing large-scale projects, P2P lending, and crowdsourcing. Hence, a regulatory framework is also needed “in the case of adoption of an ICO-based investment solution.”

The section of the study devoted to the eNaira, Nigeria's CBDC, is far larger than the sections devoted to stablecoins and ICOs. It is viewed as a possible "enabler for transformation" in the national economy by the Central Bank. It wants to achieve a final implementation of the currency in 3 to 5 years.

In December 2022, Nigeria decreased the amount of cash people and businesses can withdraw to $225 and $1,125 per week, respectively, in an attempt to push its “cash-less Nigeria” program and increase the adoption of the eNaira.

As of October 25, 2022, less than 0.5% of the population was using the eNaira, despite its debut in late 2021. While Nigeria has been recognized by Chainalysis as the leading country in Africa for crypto adoption and ranked 11th globally, the government has had a hard time convincing Nigerian residents to use the CBDC.