Foreign-currency Stablecoin Issuers Must Have N15bn Capital Base—CBN

The Central Bank of Nigeria (CBN) has ordered companies issuing foreign-currency stablecoins in Nigeria to hold at least ₦15 billion in paid-up capital, the highest entry threshold in its new regulatory framework for non-security virtual assets.

The requirement is contained in the Regulations for the Operations of Non-Security Virtual Assets in Nigeria. They set out licensing, capital, reserve, consumer protection and anti-money laundering rules for stablecoins, deposit money tokens and the firms that handle them.

Under the document, issuers of Class 2 stablecoins, defined as tokens that reference a currency other than the naira, must keep the ₦15 billion on entry and at all times afterwards. The CBN may prescribe a higher amount. Issuers of naira-referenced stablecoins, classed as Class 1, must hold ₦10 billion.

Other service providers, such as exchanges, custodians, wallet providers and payment firms, must hold a minimum of N1 billion. Where a firm also holds a licence from the Securities and Exchange Commission (SEC), the CBN capital is additional to what the SEC requires. The same money cannot be counted towards both.

The regulations say required capital must be held as cash in a designated account at the CBN, or as Federal Government of Nigeria securities held with a CBN-approved custodian and subject to a lien in favour of the Bank. Virtual assets, guarantees and anticipated transfers do not qualify.

Capital cannot be withdrawn, pledged or encumbered without the CBN’s written approval. It must also be kept separate from issuer reserves, customer funds and operational liquidity. A firm that falls below its capital requirement must notify the CBN immediately and submit a restoration plan within 10 business days. The CBN may restrict new issuance or customer onboarding until capital is restored.

The regulations state that there is no offshore issuer exemption from incorporation, licensing or capital. An applicant must be incorporated in Nigeria under the Companies and Allied Matters Act, 2020 before it can receive a final licence. It must also have a resident Chief Compliance Officer, keep records in Nigeria, and be able to comply with CBN directives without prior approval from an offshore parent.

The rules apply to any issuer whose tokens are offered, marketed or made available to people in Nigeria, whether or not it has a physical presence in the country.

Class 2 issuers face additional liquidity rules. They must maintain operational liquidity to meet Nigerian redemption requests and payment obligations, including during periods of stress. The regulations set this by reference to a US$10 million minimum, 15 per cent of the issuer’s Nigeria-linked outstanding liabilities, and the amount needed to cover 30 days of stressed Nigerian redemptions.

This liquidity must be unencumbered and held mainly in the stablecoin’s reference currency. It must sit with at least two independent approved institutions, with no more than 50 per cent dependent on any one. It is separate from capital and from the reserve pool, and cannot be counted towards either.

All licensed issuers must back stablecoins in circulation fully with eligible reserve assets. They must also hold an additional buffer of at least two per cent above par value, and cannot mint new tokens against reserves they have yet to receive. Reserves must be reconciled at the end of each business day.

Issuers are barred from paying interest, yield, dividends or other returns to holders. Reserves cannot be used for operating expenses, lending, staking or as collateral. Issuers must also hold liquid assets separate from the reserve pool to cover the higher of six months of operating expenses or the cost of an orderly wind-down.

Class 2 stablecoins may be used for cross-border payments and remittances, trade settlement, trading through licensed firms, and holding or transferring foreign-currency value. They cannot be used to price or settle domestic naira obligations, except where foreign-exchange or other law expressly permits it.

Cross-border transactions in virtual assets will be treated as foreign-exchange transactions. A payment for imported goods in a Class 2 stablecoin must be supported by a valid Form M. A capital inflow received in a virtual asset will not qualify for an electronic Certificate of Capital Importation until it is converted to naira through an authorised dealer.

The regulations ban algorithmic stablecoins, tokens backed mainly by other virtual assets, tokens issued by sanctioned persons, and tokens that carry no enforceable right of redemption at par. No one may issue, offer, distribute or trade them in Nigeria.

Operating without the required licence attracts a fine of at least N100 million, plus N1 million for each day the breach continues. Breaching the ban on interest and yield attracts a fine of twice the amount paid. Fraudulent or deliberate misrepresentation about reserves or stablecoin operations carries a fine of at least ₦500 million and referral for prosecution.

A stablecoin may be designated as systemic if its circulating supply exceeds N500 billion for 30 consecutive days, or if more than five million people in Nigeria hold or use it. Systemic stablecoins face enhanced supervisory requirements.