The Central Bank of Nigeria (CBN) has approved the launch of the Nigerian naira (cNGN) stablecoin, which is set to launch on February 27, 2024.
The cNGN is powered by the Africa Stablecoin Consortium (ASC), a consortium of Nigerian financial institutions, fintechs, and blockchain experts.
Stablecoins are cryptocurrencies uniquely designed to maintain a constant value, as they are often pegged to or tied to another currency, commodity, or financial instrument.
The Nigerian Securities and Exchange Commission (SEC), the Nigerian Financial Intelligence Unit (NFIU), and the CBN all established regulatory standards and requirements for the cNGN stablecoin, according to a statement on the ASC’s website on Thursday.
The ASC said it is committed to enhancing secure and compliant financial interactions, transforming the manner in which people transact and engage with their money securely and effortlessly.
“This ushers in a new era of financial fluidity, bridging the Nigerian Naira with the global market through blockchain technology,” the statement read.
“Backed 1:1 by Naira reserves held in designated commercial banks, the cNGN Stablecoin transforms the Naira into a dynamic tool for worldwide remittances, commerce, trade, and investment.
“More than just a currency, cNGN shortens settlement times, enabling payments that traverse the globe swiftly, mirroring the speed of a text message and at a fraction of the cost.
“This breakthrough paves the way for instantaneous financial transactions, seamlessly connecting Nigeria’s vibrant economy with international markets and offering unprecedented efficiency in both domestic and global financial interactions.”
How the naira stablecoin works
According to the ASC, stablecoin can solve the what, where, and when problem, as people can pay for anything, anywhere, and at any time. With an easy tap, users can shop around the world and pay in naira without the traditional challenges of currency conversion and hefty international transaction fees.
The consortium also disclosed that “Supporting your loved ones back home becomes as simple as a quick tap on your phone” with the new innovation.
“No more standing in lines. With cNGN, funds land directly in their wallets within seconds, ready to fuel their dreams and brighten their days. No more distance, no more delays, just the magic of compliant virtual assets bridging the gap between hearts,” the ASC added.
“Cut out the red tape and sky-high fees of traditional international trade. With cNGN, you can send and receive payments across the globe instantly, enabling you to transact with national and international partners in any stablecoin currency, fueling economic growth and global success.
“Get paid, anywhere, instantly. Ditch the limitations of location and outdated payment systems. With cNGN, you can freelance for the world, right from your desk in Nigeria. Your talent knows no borders, so why should your income? Skip the bank queues and paperwork.”
The unveiling of the cNGN comes over two years after digital currency transactions were banned by the apex bank.
In February 2021, CBN issued a directive that deposit money banks (DMBs), non-bank financial institutions (NBFIs), and other financial institutions (OFIs) close accounts of persons or entities involved in cryptocurrency transactions within their systems.
The regulator further warned local financial institutions against dealing in crypto assets or facilitating payments for crypto exchanges, citing money laundering (ML), terrorism financing (TF), cybercrime, and the volatility of cryptocurrencies as reasons for the ban.
However, the apex bank, on December 22, 2023, issued fresh operational guidelines on virtual asset service providers (VASPs) to all banks and OFIs — signalling a shift from its initial position, which restricts crypto transactions.
VASPs are entities that conduct exchanges between virtual assets (cryptocurrencies) and fiat currencies and transfers of virtual assets.
