Nigeria is getting its stablecoin rules.
The Central Bank of Nigeria informed of new regulations targeting a more comprehensive framework for managing stablecoin issuance and digital assets inside the country.
These will apply to native Naira-backed stablecoins, foreign currency stablecoins, as well as Deposit Money Tokens (DMTs) and other relevant bank-issued tokens.
Importantly, future management of any token or stablecoin-related activity will require an official approval and license from the Bank under the latest guidelines revealed.
Recently, Nigeria set up a stablecoin working group.
Class 1 and Class 2 Issuance
Stablecoins here are split into separate categories.
Class 1 will refer to stablecoins backed by the Nigerian Naira (NGN) fiat currency reserves, while Class 2 targets other stablecoins backed by foreign fiat currency reserves.
Under this, every issuer shall maintain a Reserve Pool with transparent backing assets.
Importantly, the new guidelines stress the equal redemption of every stablecoin holder and balance, as well as restricting regular fees for redemptions – unless they are marked for special cases.
Each issuer types will follow matching class types and licenses. There are also more licenses available to firms wishing to be regulated for other digital asset activities.
Other stablecoins or tokes will be classified as Prohibited Tokens.
No algorithmic stablecoins are permitted to be trading in Nigeria, including other fiat token types not backed by fiat reserves.
The Bank may ban tokens if it deems other potential risks to the jurisdiction.
Stablecoin Management
In terms of capital requirements, Class 1 issuers will require at least 10B Naira, while Class 2 issuers will need 15B Naira. Issuers will have to issue from a Nigerian-based entity approved by the Bank.
Similar to the Bank of England framework, certain stablecoins may receive a Systemic Stablecoin label if its total supply goes beyond 500M Naira ($371M) every day for a month, or 5M + individuals become holders of the stablecoin.
Other specific stablecoin metrics may be applied to ensure this.
On stablecoin reserve requirements, licensed issuers must have no less than 40% in High Quality Liquid Assets (HQLA).
The following may qualify: Nigerian Treasury Bills, bonds from the Federal Government of Nigeria, Naira tokenized money market funds, Overnight Repurchase Agreements, and others.
Class 1 and 2 issuers have additional capital criteria for liquidity, including holding at least 20% as cash in Central Bank of Nigeria deposits for the former. Monthly attestation reports are expected.
Additionally, stablecoin conversions between stablecoins will fall under the Foreign Exchange regulation.
Overall, a lot of progress was made, especially as such reforms were proposed back in February.
Bank of Ghana Stablecoin Directive
Other nearby countries are also starting to work on stablecoin regulations.
The Governor of Bank of Ghana recently informed attendees at the Virtual Assets Summit a few days ago that its bank was working on an upcoming stablecoin directive.
If more countries across Africa are able to set up their stablecoin frameworks, it provides for a more cohesive oversight opportunity.
