The Central Bank of Nigeria (CBN) has introduced mandatory next-business-day redemption for holders of licensed stablecoins, requiring issuers to exchange tokens for their equivalent value at par no later than the end of the business day following a valid redemption request.
The new regulations also prohibit stablecoin issuers from paying interest, yield or any form of return to customers for holding or depositing their tokens, with violators facing fines equivalent to twice the prohibited payment.
Under the framework, issuers must maintain reserve assets sufficient to cover all tokens in circulation, alongside an additional buffer of at least two per cent of the total value of outstanding tokens.
The CBN said the reserve buffer cannot be released without its approval, while issuers are prohibited from minting tokens before receiving equivalent reserve assets. Minting against anticipated deposits or expected receipts is also prohibited.
Issuers must reconcile their reserve positions at the close of every business day.
For Class 1 stablecoins, which are pegged to the naira, issuers are required to maintain at least 20 per cent of their reserve pool in a CBN reserve deposit account.
The regulations also prohibit issuers from using reserve assets to finance operational expenses, provide loans, participate in staking activities or serve as collateral.
Violations involving the leveraging or encumbering of reserve assets attract fines ranging from N250 million to N500 million for each breach.
The apex bank further stipulated that standard redemption requests must be processed free of charge.
However, during periods of financial stress, the CBN may permit issuers to extend redemption timelines by up to five business days.
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Issuers that suspend redemption services must notify the bank within one hour, issue a public notice and obtain written approval before extending the suspension beyond 48 hours.
The regulations also prohibit algorithmic stablecoins, tokens backed primarily by other virtual assets and tokens issued by sanctioned individuals or entities or linked to sanctioned jurisdictions.
They further prohibit the issuance, offering or facilitation of access to any token marketed as a stablecoin without an enforceable right for holders to redeem it at par.
The CBN warned that individuals and firms involved in issuing or facilitating access to prohibited tokens would face enforcement action.
The bank also clarified that stablecoins must not be presented or marketed as bank deposits or products covered by the Nigeria Deposit Insurance Corporation (NDIC).
It added that fraudulent or deliberate misrepresentation of reserve holdings or operational activities would attract a minimum fine of N500 million, alongside referral for prosecution.
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