CBN's new stablecoin rules: naira tokens need full backing, dollar tokens face separate licence

The Central Bank of Nigeria has introduced stricter requirements for stablecoins backed by the naira and by foreign currencies, setting different standards for issuance, reserves, redemption and use. The framework classifies stablecoins into two groups: Class 1 for naira-referenced tokens and Class 2 for foreign currency-referenced tokens, including those pegged to the US dollar.

The split matters because stablecoins, unlike Bitcoin, are designed to hold steady value by linking to an underlying asset, usually a fiat currency. That makes them useful for digital payments, cross-border transfers, savings and international transactions, and it puts them directly in the path of monetary policy and foreign exchange management.

What naira-backed issuers must hold

Naira stablecoins must keep a one-to-one relationship with the naira and be fully backed by eligible naira-denominated reserve assets. Issuers cannot create tokens based on anticipated future deposits or rely on market demand to hold their value.

Reserves must equal at least the full value of tokens in circulation, plus an additional two percent buffer to absorb valuation losses and operational liabilities. At least 40 percent of the reserve pool must sit in cash or eligible high-quality liquid assets. Class 1 issuers must also keep a reserve deposit with the CBN of at least 20 percent of their total reserve pool.

The rest can go into approved instruments, including Nigerian Treasury Bills, Federal Government bonds with specified short maturities, naira deposits in licensed commercial banks and eligible money market funds, within regulator limits.

Dollar tokens face a separate gate

Issuers of dollar-backed stablecoins need a Foreign Currency Issuer Licence and must operate through an entity incorporated in Nigeria. They must also get CBN approval for the individual token before issuance begins.

Their reserves must be held in the currency the token references, in eligible assets such as cash deposits with approved Nigerian or foreign banks, short-term sovereign securities and qualifying overnight repurchase agreements. There is no fixed requirement for Class 2 reserves to be held domestically, but issuers must keep operational liquidity that is legally and operationally accessible to meet redemption requests, payment obligations and other liabilities, including during financial stress.

On use, naira tokens are permitted for approved payments, settlement, treasury management and balances incidental to these activities. Dollar tokens are allowed for cross-border payments, remittances, international commerce, trade settlement and transactions through licensed providers. Holders can transfer and retain foreign currency value, subject to regulation.

Approval of a dollar-backed token does not mean it can settle domestic naira obligations freely. The CBN subjected such transactions and conversions against the naira to existing foreign exchange regulations and other laws, closing off a possible route around FX rules.

Redemption rights and what is banned

Holders of both categories get a legally enforceable right to redeem tokens at face value in the reference currency. Issuers must process valid requests no later than the end of the business day after receipt. Standard redemption must be free of fees, though the CBN may approve charges for non-standard settlement where they reflect actual costs and are properly disclosed.

The rules prohibit interest, yields, dividends or other financial returns simply for holding stablecoins. Algorithmic stablecoins that rely mainly on supply and demand adjustments rather than full reserve backing are banned. Tokens that reference fiat currencies but are backed mainly by other virtual assets are equally prohibited.

For the naira, the framework tries to keep digital asset growth inside the CBN's monetary, FX and stability guardrails. Stronger reserve rules and redemption rights could build confidence in regulated payment tokens, but adoption of naira-backed coins and the pull of dollar-linked tokens will depend on how well the CBN supervises the regime.