Nigeria sets new crypto licensing rules, bans algorithmic stablecoins

Nigeria's Central Bank has announced new regulations requiring foreign-currency stablecoin issuers, such as those behind dollar-pegged tokens like USDT and USDC, to maintain a minimum paid-up capital of ₦15 billion ($11.16 million) to operate in the country. The rules, released on Thursday, also mandate that these foreign issuers establish licensed entities in Nigeria and adhere to local capital, reserve, and operational requirements, or risk losing market access.

Additionally, naira-backed stablecoin issuers must maintain a ₦10 billion ($7.44 million) minimum capital. The new framework establishes a formal licensing system for stablecoins, digital tokens that aim to maintain a fixed value against fiat currencies like the US dollar or naira. These tokens are commonly used by businesses and individuals in Nigeria for cross-border money transfers, transactions, and accessing the US dollar.

The regulations come as major stablecoin issuers like Tether and Circle seek to expand their presence in Nigeria. Tether recently hired an Expansion Manager for Nigeria, while Circle appointed Gillian Darko, a former strategy executive, as its Vice President and Head of Africa. The CBN's rules strictly prohibit algorithmic stablecoins, which rely on algorithms to adjust token supply and maintain value, as they pose higher risks and are harder to regulate.

Under the new rules, foreign-currency stablecoin operators must obtain explicit regulatory permission to continue operating while their applications are reviewed. If they fail to submit the required documents within the specified period, they must cease operations until they obtain the necessary licence or authorization.