A recently released document indicates that the Nigerian central bank is open to developing a regulatory framework for the potential future implementation of stablecoin offerings. The document also discusses the regulation of initial coin offerings (ICOs) and how these could become “a new way to attract foreign direct investment (FDI) and raise capital.”
successful payment mechanisms”
The Central Bank of Nigeria (CBN), in its recently released payment system document, states that the bank is open to developing “a (regulatory) framework for the possible implementation of stablecoins.” The document asserts that the implementation of such a stablecoin “is likely to be a successful payment mechanism” and therefore “a regulatory framework for such an implementation needs to be developed.”
The CBN’s Nigerian Payment System Vision 2025document, in addition to referring to the implementation of stablecoin, also discusses the development of a framework to regulate initial coin offerings (ICOs) While acknowledging the important role that ICOs will play, it also states that “the implementation of stablecoin will be a key element of the Nigerian payment system. However, the document states that regulation is necessary to revive investor interest in this form of financing.
“Given the lack of regulation, there is little appetite to adopt the current round of ICOs. However, given the role of ICOs as an asset class, there is potential to adopt ICO technology as a new approach to fundraising for capital projects (wholesale market) or peer-to-peer lending or crowdfunding (retail market),” the document reads.
The document adds that if properly implemented and a supported regulatory framework is in place, ICOs could become “a new way to attract foreign direct investment (FDI) and raise capital.”
Regulation of Initial Coin Offerings
While the CBN has in the past discouraged or prohibited financial institutions from facilitating transactions involving cryptocurrencies, the latest payment system document suggests that the central bank’s stance on privately issued digital currencies is evolving The latest Payment Systems document suggests that the central bank’s stance on privately-issued digital currencies is evolving.
After the CBN directed banks to stop extending services to crypto entities in February 2021, some Nigerian commentators accused the central bank of usurping the authority of the Nigerian Securities and Exchange Commission (NSEC). However, according to the document, which envisions a cashless economy by 2025, the CBN and NSEC will jointly regulate the digital currency space.
“While the CBN has a role in the payment side, the SEC needs to provide a regulatory framework because tokens are a new asset class,” the document says.
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