The Central Bank of Nigeria (CBN) has unveiled sweeping regulations to tighten its control over non-security virtual assets, introducing stringent capital requirements, restricting stablecoin operations, compelling foreign issuers to establish Nigerian subsidiaries and placing peer-to-peer (P2P) cryptocurrency transactions under closer regulatory surveillance.
Under the new framework, foreign currency-referenced stablecoin issuers seeking to operate in Nigeria must meet a minimum paid-up capital requirement of N15 billion, while issuers of naira-referenced stablecoins are required to maintain at least N10 billion.
Other non-security virtual asset service providers are required to maintain a minimum capital of N1 billion, depending on the nature of their activities and applicable licensing category.
The regulations represent one of the most comprehensive attempts by the apex bank to bring Nigeria’s expanding virtual asset market within a clearly defined supervisory framework, amid concerns over financial stability, consumer protection, money laundering, foreign exchange management and the potential risks posed by unregulated digital financial products.
The new rules cover a broad range of activities, including virtual asset exchanges and conversions, domestic and cross-border transfers, remittances, payment services, token distribution, payment gateways, stored-value facilities and platforms facilitating P2P transactions.
The CBN’s intervention signals a tougher regulatory environment for cryptocurrency businesses, particularly foreign platforms that have been serving Nigerian customers without establishing the corporate and operational structures now required under the framework.
Under the provisions, foreign stablecoin issuers seeking access to the Nigerian market must establish locally incorporated entities and obtain the appropriate CBN authorisation. Holding a foreign licence or operating through a Nigerian intermediary will not, by itself, satisfy the new requirements.
The framework also requires regulated operators to maintain an effective physical and management presence in Nigeria, with adequate governance structures, resources and internal controls to support regulatory supervision.
Compliance officers and money laundering reporting officers must be resident in Nigeria and have unrestricted access to relevant customer, wallet and transaction information.
The requirements could significantly reshape the operations of international digital asset companies, increasing their compliance costs and compelling them to reconsider their business models in one of Africa’s most active cryptocurrency markets.
The CBN has also established a licensing structure that takes account of the different regulatory responsibilities of financial and capital market operators.
While existing Securities and Exchange Commission-regulated entities seeking to provide additional services must obtain the relevant authorisation, CBN-licensed financial institutions intending to undertake payment-related virtual asset activities must secure approval to extend their permitted operations.
Other operators are required to obtain the appropriate licence before commencing regulated activities.
The regulations make it clear that existing authorisations do not automatically permit an institution to venture into every category of virtual asset business. Operators must obtain written approval before commencing activities covered by the new framework.
A major component of the regulations is the CBN’s attempt to establish tighter controls over stablecoins, particularly those used for payments, transfers and settlement.
The apex bank has prohibited algorithmic stablecoins and stablecoins backed primarily by other virtual assets, reflecting concerns about the vulnerability of such products to market instability and the collapse of their underlying mechanisms.
Stablecoin issuers must maintain full reserve backing, ensuring that the value of eligible reserve assets corresponds to the value of tokens in circulation.
The framework further requires an additional two per cent overcollateralisation, while imposing strict restrictions on how reserve assets may be managed and deployed.
Issuers are prohibited from lending, pledging or using reserve assets as collateral, or deploying them for their own operational activities outside the limited arrangements permitted under the regulations.
For naira-referenced stablecoins, the rules prescribe additional safeguards, including a 20 per cent CBN Reserve Deposit and requirements for holding cash and high-quality liquid assets. The framework also requires the reserve pool to be distributed across at least three CBN-licensed deposit money banks.
No single CBN-licensed bank is permitted to hold more than 30 per cent of the total reserve pool.
Stablecoin issuers are also required to submit monthly reserve attestations within 15 business days after the end of each calendar month, providing the regulator with a basis for monitoring the adequacy and composition of backing assets.
The CBN has equally strengthened the rights of stablecoin holders by requiring issuers to redeem tokens at par value.
Under the regulations, holders of licensed stablecoins have an enforceable right to redeem their tokens, with issuers required to complete standard redemption requests no later than the end of the business day following receipt of a valid request.
In exceptional stress situations, the redemption period may be extended for a maximum of five business days, subject to the CBN’s permission.
The framework also prohibits standard redemption fees, although non-standard settlement charges may be permitted with regulatory approval, provided they are proportionate to actual costs and adequately disclosed.
These provisions are designed to address one of the major concerns surrounding digital tokens: whether holders can reliably convert their assets into the underlying currency when they need to.
The regulations also place restrictions on the circumstances in which stablecoin issuers may suspend redemption. Operators must notify the CBN within one hour of a suspension, while any suspension exceeding 48 hours requires written regulatory approval.
However, the apex bank has made an important distinction between regulatory approval of a stablecoin and a guarantee of its value or convertibility. It also states that stablecoins are not bank deposits and are not covered by deposit insurance provided by the Nigeria Deposit Insurance Corporation.
Beyond stablecoins, the CBN has turned its attention to the fast-growing P2P cryptocurrency market, which has become an important channel for digital asset transactions among Nigerian users.
Under the new rules, platforms facilitating P2P transactions through order matching, transaction displays, escrow arrangements, payment and settlement support, customer verification or dispute resolution must obtain the relevant regulatory authorisation.
Operators are expected to establish comprehensive transaction-monitoring systems capable of identifying suspicious activities and reporting them to the appropriate authorities.
The CBN specifically identifies transaction splitting, rapid movement of digital assets, layering through multiple wallets and accounts, the use of mule or third-party accounts and unusual concentrations of counterparties as potential indicators of suspicious transactions.
The regulator may also require periodic, event-driven or real-time reporting of P2P transactions, depending on the risks associated with the activities.
Importantly, authorisation to facilitate domestic P2P transactions does not automatically permit cross-border transfers or remittances. Platforms handling transactions involving foreign counterparties or cross-border flows must obtain additional approval.
The provisions could have significant implications for cryptocurrency platforms and traders who rely on P2P channels to move funds between digital assets and conventional currencies.
The CBN has also tightened requirements for virtual asset custodians and wallet service providers, compelling them to segregate customer assets and maintain adequate safeguards for private keys.
Custodians are prohibited from lending, pledging, staking or otherwise using customers’ virtual assets for their own benefit without the necessary regulatory authority.
The restrictions are intended to prevent the commingling and misuse of customer assets, particularly in circumstances where an operator faces financial distress or operational failure.
The framework further subjects significant shareholders, beneficial owners, directors and senior management of regulated entities to fit-and-proper assessments. Individuals or entities holding five per cent or more of an operator’s shares fall within the scope of the relevant ownership scrutiny.
Banks and financial holding companies seeking exposure to virtual asset businesses must also operate through separately incorporated subsidiaries and obtain prior CBN approval.
The regulations make capital requirements distinct from reserve assets, customer funds, CBN reserve deposits and operational liquidity. This means operators cannot count customer money or stablecoin backing assets towards meeting their minimum capital obligations.
Where an institution’s capital falls below the prescribed minimum, it must immediately notify the CBN and submit a capital restoration plan within 10 business days.
The framework also requires issuers to maintain liquid own-funds assets sufficient to cover the higher of six months’ projected operating expenses or the estimated cost of an orderly wind-down.
For systemic stablecoin issuers, the requirements become more demanding, including real-time reserve reporting, stress testing at least twice a year and approved recovery and resolution plans.
Although the regulations provide a more structured environment for virtual asset businesses, they also raise questions about the cost of compliance and the ability of smaller operators to meet the new financial and operational requirements
The higher capital thresholds, local incorporation obligations, reserve restrictions and extensive reporting requirements could increase barriers to entry, potentially encouraging consolidation among operators with the financial capacity to remain in the market.
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Bamidele Ogunwusi is a financial journalist with a strong analytical mind on issues that surround the financial sector. A graduate of Obafemi Awolowo University, Ile-Ife has garnered experience both locally and internationally in finance reporting. He has received awards and certificates from notable organisations like: the Centre for Investigative Journalism, Lagos, Bloomberg and Press Association, UK.
