The Central Bank of Nigeria has directed issuers of naira-referenced stablecoins to keep at least 20 per cent of their total reserve assets in a dedicated account with the apex bank, with the funds prohibited from earning interest or being withdrawn without prior written approval.
The requirement, contained in the CBN’s Regulations for the Operations of Non-Security Virtual Assets in Nigeria, obtained by THE POINT places a significant portion of the reserves backing naira stablecoins under the direct control and real-time supervision of the regulator.
Under Section 24.25 of the regulations, every licensed issuer of a Class 1 stablecoin must maintain not less than 20 per cent of its total reserve pool as a cash deposit at the CBN in a dedicated Reserve Deposit Account.
The regulation further stipulates that the deposit must be maintained at the apex bank and cannot be withdrawn without its prior written consent.
It also provides that the deposit will not attract interest, meaning stablecoin issuers will be unable to earn returns on the mandatory funds held with the CBN.
The bank will also maintain real-time visibility into the balance of the reserve account, giving it continuous access to information on the funds set aside by issuers to support their digital currencies.
The CBN explained that the deposit would ordinarily serve as a backstop during significant redemption stress, adding that it could only be accessed after an issuer had exhausted its operational liquidity buffer, immediately available commercial bank cash and other readily liquid reserve assets.
However, the regulator may direct otherwise where necessary for financial stability reasons.
The rules also give the CBN discretion to increase the minimum reserve deposit above 20 per cent through a directive, although the requirement cannot be reduced below that threshold.
The provision is part of a wider reserve management framework designed to ensure that naira-backed stablecoins are supported by readily accessible assets and that issuers can meet redemption obligations when holders seek to convert their tokens into naira.
Under the framework, the 20 per cent CBN deposit is not the only liquidity requirement imposed on Class 1 stablecoin issuers.
Section 24.12 requires issuers to maintain at least 40 per cent of their total reserve pool in cash and high-quality liquid assets, excluding the CBN reserve deposit.
This means issuers must maintain the mandatory 20 per cent deposit at the apex bank in addition to the separate 40 per cent cash and high-quality liquid assets requirement.
The qualifying assets for the latter category include cash held with deposit money banks, eligible Federal Government Treasury Bills, Federal Government bonds, overnight reverse repurchase agreements and Open Market Operation bills, subject to prescribed maturity limits.
The regulations also require issuers to maintain an additional reserve buffer of at least two per cent of the par value of stablecoins in circulation from their own funds.
This requirement is separate from the full reserve backing obligation, which requires issuers to hold eligible assets equivalent to the value of stablecoins in circulation.
The CBN has also restricted the types of assets that can be used to back naira stablecoins.
Under Section 24.28, eligible assets include deposits at the CBN, Nigerian Treasury Bills with residual maturities not exceeding 90 days, Federal Government bonds with residual maturities of not more than 180 days and naira-denominated deposits held in segregated accounts with CBN-licensed commercial banks.
Issuers may also invest in naira-denominated money market funds regulated by the Securities and Exchange Commission, but such investments cannot exceed 10 per cent of total reserves.
The rules prohibit the use of equities, corporate bonds, commercial papers, virtual assets, loans, receivables, physical commodities and real estate as reserve assets for naira stablecoins.
They also prohibit issuers from creating new stablecoin tokens before receiving and holding equivalent eligible reserve assets.
The regulation states that minting against anticipated future reserve receipts is prohibited.
In addition, reserve assets must be legally and operationally separated from the issuer’s operational funds and corporate assets. They must be held exclusively for the benefit of stablecoin holders, who are expected to have first-priority claims on the reserve pool ahead of other creditors in the event of the issuer’s insolvency, subject to applicable insolvency law.
The framework further requires issuers to maintain limits on the concentration of reserve assets. No more than 30 per cent of reserves may be held with a single deposit money bank, while issuers must maintain relationships with at least three deposit money banks in addition to the CBN.
The requirements are expected to increase the cost of operating naira stablecoin businesses, as issuers will have to maintain substantial liquid assets while keeping a significant proportion of their reserves in a non-interest-bearing account.
The rules also impose additional reporting and audit obligations. Issuers are required to provide information on the composition and value of their reserves, reserve coverage, liquidity position and compliance with the prescribed deposit requirements.
Independent auditors are expected to confirm the composition, value, coverage and segregation of reserve assets, while the CBN retains supervisory powers to demand further information and take action where an issuer fails to meet its obligations.
The reserve deposit requirement applies specifically to Class 1 stablecoin issuers, which issue tokens referenced to the naira. It does not apply to Class 2 issuers of foreign-currency-referenced stablecoins.
For Class 2 issuers, the regulations provide for reserves held in the relevant reference currency and separate operational liquidity arrangements to meet expected and stressed redemption demands in Nigeria.
The new framework therefore establishes different reserve and liquidity obligations for naira-backed and foreign-currency-backed stablecoins, while placing both categories under the CBN’s licensing and supervisory framework.
