Nigeria Bans Algorithmic Stablecoins as New Licenses Demand Up to ₦15 Billion

Nigeria’s central bank has introduced a sweeping rulebook for payment-oriented digital assets, with separate licensing requirements for stablecoins linked to the naira and those referencing foreign currencies. The rules also prohibit algorithmic stablecoins that depend primarily on market incentives instead of eligible reserves, signaling a sharp distinction between fully backed payment tokens and less predictable designs.

Capital thresholds and new duties for issuers

The Central Bank of Nigeria’s Regulations for the Operations of Non-Security Virtual Assets took effect on November 5. Under the regime, a Class 1 issuer of a naira-referenced stablecoin must maintain at least ₦10 billion in paid-up capital. A Class 2 issuer of a foreign-currency-referenced stablecoin faces a minimum of ₦15 billion. Other covered virtual-asset service providers have separate capital and licensing obligations.

The rules demand more than a large balance sheet. Issuers must address reserves, redemption procedures, transaction monitoring, sanctions screening, governance and cybersecurity. Each token requires approval that takes account of its reference asset, reserve arrangement and supported blockchain networks. A company based abroad cannot necessarily reach Nigerian users simply by offering a stablecoin over the internet; local incorporation and approval requirements apply to the relevant issuance category.

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For foreign-currency stablecoins, the central bank is also seeking more visibility into cross-border payments and flows involving the naira. These provisions may materially affect remittance products that convert between local bank accounts and dollar-denominated digital tokens.

Existing providers were given a transition process including registration, supervisory reporting and a licensing application deadline. TheCable’s analysis of the text identifies a 30-day registration deadline and a 180-day period for existing operators to complete license applications, subject to the conditions of the transition.

Why the ban matters for Africa’s stablecoin market

The central bank is making an explicit policy choice: stablecoins used for payments should not maintain their peg principally through mechanisms dependent on another volatile token or trading incentives. Fully reserved tokens are not risk-free, but supervisors can at least inspect the underlying assets and redemption processes.

Nigeria has one of the region’s important digital-asset user bases, and stablecoins have practical applications in cross-border trade and remittances. A complex licensing structure could improve institutional confidence while increasing costs for smaller issuers and payment companies.

The legal framework also draws a boundary between central-bank oversight of payment-oriented tokens and the securities regulator’s remit. Firms operating across both categories may need approvals from both bodies. Previous TechGaged coverage of Ripple’s RLUSD payment expansion in Africa illustrates why the regional compliance environment matters beyond Nigeria’s domestic exchanges.

Sources: Central Bank of Nigeria rulebook; The Block; TheCable.