The CBN is open to creating a regulatory framework for possible stablecoin implementations, according to a recently published document seen by Nairametrics.

The document titled “Nigerian Payment System Vision 2025” includes provisions to regulate initial coin offerings (ICOs) and stablecoins.

The regulation of initial coin offerings (ICOs) and how they can become “a new approach to attract foreign direct investment (FDI) and raise capital” were covered in the report, suggesting that the major bank is moving towards mainstream adoption of cryptocurrencies.

The CBN also said that it will engage relevant stakeholders to review and implement remittance solutions using blockchain technology.

On stablecoins: Excerpts from the document provide insight into the main bank’s view of stablecoins and how they can help facilitate cross-border transactions.

  • “Stable Coin implementations are likely to be successful payment mechanisms. There is a need to develop a regulatory framework for such implementation which will almost certainly be used in Nigeria.”

In ICOs: The document also states that there is a potential to use ICO technology as a new method of financing capital projects (in the wholesale market), peer-to-peer lending or crowdfunding (for the retail market), given the role of ICOs as an asset class. However, he cited a lack of regulation as a major impediment.

  • “Given the lack of regulation around the current generation of ICOs, there is little desire to adopt them.”

The CBN also suggested that ICOs could become financial instruments to attract FDI and raise capital, especially for the utility sectors.

  • “If properly implemented and backed by the right rules and regulations, ICOs could become financial instruments and investment options, creating a new way to attract foreign direct investment (FDI) and raise capital.”
  • “An interesting use case could be in the energy (utility) sector, where people can crowdfund an energy project initiative by investing money in exchange for a currency as capital. Additionally, tokens created as in the case of Power could be used to provide access to power to participants. On the one hand, it could be used as an investment tool, and on the other hand, it could be used as a ticket to access a product or service.”

The document also stated that the SEC would need to provide a regulatory framework as tokens would be a new asset class.

The Securities and Exchange Commission published a digital asset regulation last May, which provides guidance for the registration of cryptocurrency assets, including ICOs. In regulation, the SEC also defines ICOs as Security Token Offerings: “Security Token Offering (STO)” means any offer and sale of digital tokens that are considered securities.

However, the broader recommendations indicate that the CBN will work with the SEC to jointly develop a regulatory framework for ICO adoption.

“CBN would consider developing a regulatory framework for the potential implementation of ‘Stablecoin Offerings.’ CBN would continue with its watchdog report on ICOs, as well as work with the SEC to jointly develop a regulatory framework in the event of adoption of an ICO-based investment solution.”

what you should know

The most recent document on the payments system implies that the CBN’s attitude towards privately produced digital currencies is changing, despite its record of discouraging or prohibiting financial institutions from assisting transactions using cryptocurrencies.

  • The Crypto community had previously accused Nigeria’s main bank of usurping the authority of the Nigerian Securities and Exchange Commission when CBN ordered banks to stop providing services to cryptocurrency companies in February 2021 (NSEC).
  • However, the document anticipates a cashless partnership by 2025 and states that CBN and NSEC will co-regulate the digital currency market.
  • “CBN would handle the payments, but the SEC would need to provide a regulatory framework as tokens are a new asset class,” the document says.

Download the report here ==> Nigerian Payment System 2025