Nigeria Plans Legal Framework For Stablecoins And ICOs

The Nigerian central bank is set to develop a regulatory framework for stablecoins and ICOs, according to a recently unveiled document.

The Central Bank of Nigeria (CBN) has released a report that explores the possibility of adding a stablecoin to Nigeria's current payments system.

The report, titled "Nigeria Payments System Vision 2025," provides an outline of what a regulatory framework for stablecoins might look like. It further emphasizes that stablecoins have the potential to provide a more efficient and successful payment system in Nigeria.

The CBN's Nigeria Payments System Vision 2025 document not only mentions stablecoin implementations but also discusses the creation of a regulatory framework for initial coin offerings (ICOs). The document acknowledges the key role that ICOs may play but notes that regulation is needed if investors' interest is to be revived.

For example, the CBN believes that ICOs have the potential to be a new way of crowdsourcing for big projects and peer-to-peer lending. However, at present, there is no regulation in that sector, which can lead to losses for investors.

According to the document, proper implementation and support of a regulatory framework could make ICOs an attractive option for foreign direct investment and capital raising.

The Apex bank added that it would continue to keep a close eye on Initial Coin Offerings and work with the Security Exchange Commission to develop a regulatory framework in the event of an ICO-based investment solution adoption, Coin Telegraph reported.

The report not only mentioned stablecoins and ICOs, but it placed a great deal of emphasis on the Nigerian CBDC, eNaira. The Central Bank sees it as a tool that could help to bring about positive change and transformation in the national economy, which has been plagued by many setbacks.

The bank is hopeful that it will be able to integrate the currency into the economy within the next five years.

Nigeria's attempts to increase the use of the eNaira by reducing cash withdrawal limits for individuals and businesses in December 2022 backfired, with many Nigerians voicing their discontent. As a result, the Central Bank of Nigeria (CBN) has since increased the limit.

However, even before this controversial policy change, adoption rates for the e-naira had been relatively low. According to Cointelegraph, as of Oct. 25, 2022 (one year after its launch), less than 0.5% of Nigeria's population had used the eNaira.

Meanwhile, several economists have condemned the central bank's intention to develop a regulatory framework for adopting stablecoin. They say that this is premature and obdurate, considering the failure of the eNaira after it was incorporated into the economy, Punch reported.