The CBN is open to creating a regulatory framework for potential implementations of stablecoins, according to a recently released document seen by Nairametrics.
The document titled “Nigeria Payment System Vision 2025” includes provisions for regulating initial coin offerings (ICO) and Stable Coins.
The regulation of initial coin offerings (ICOs) and how they can develop into “a new approach to attract foreign direct investment (FDI) and raise capital”were covered in the report, suggesting that the apex bank is moving towards mainstream adoption of cryptocurrencies.
The CBN also said it will engage relevant stakeholders to review and implement remittance solutions using blockchain technology.
On Stable Coins: Excerpts of the document provide an insight into the apex bank’s take on stable coins and how they can help facilitate cross-border transactions.
“Stable Coin implementations are likely to be successful payment mechanisms. There is a need to develop a regulatory framework for such implementation that almost certainly will be used in Nigeria.”
On ICOs: The document also states there is a potential for using ICO technology as a new method of financing for capital projects (in the wholesale market), peer-to-peer lending, or crowdfunding (for the retail market), given the function of ICOs as an asset class. However, it cited the lack of regulation as a major impediment.
“Given the lack of regulation around the current generation of ICOs, there is little desire to adopt them.”
The CBN also suggested ICOs could be turned into financial instruments for attracting FDIs and raising capital, especially for the Utility Sectors.
“If implemented properly and supported with the right rules and regulations, ICOs could be turned into Financial Instruments and Investment Options, creating a new way to attract Foreign Direct Investment (FDI) and raise capital.”
“An interesting use case could be in the Power (utility) sector where people can crowd-fund a power project initiative by investing money in return for a coin as equity. Further, the tokens created as in the case of Power could be used to provide access to power for participants. On one hand, it could be used as an investment tool and on the other hand, it could be used as a passage for access to a product or service.”
The document also stated that SEC would need to provide a regulatory framework since the tokens would be a new asset class.
The Security and Exchange Commission released a digital asset regulation last May, which provides guidance for the registration of cryptocurrency assets including ICOs. In the regulation SEC also defines ICOs as Securities Token Offering – Securities Token Offering (STO)” means any offering and sale of digital tokens that are considered securities.
However, the broader recommendations indicate the CBN will work with SEC to jointly develop a regulatory framework for ICO adoption.
“CBN would consider the development of a regulatory framework for potential implementation of ‘Stable Coin Offerings’. CBN would continue its watching brief on ICOs as well as work with SEC to jointly develop a regulatory framework in the event of adoption of an ICO-based investment solution.”
What you should know
The most recent payments system paper implies that the CBN’s attitude toward privately produced digital currencies is changing, despite its record of discouraging or prohibiting financial institutions from assisting transactions that use cryptocurrencies.
The Crypto community had earlier charged Nigeria’s apex bank with usurping the authority of the Nigerian Securities and Exchange Commission when the CBN ordered banks to halt providing services to cryptocurrency firms in February 2021. (NSEC).
However, the document anticipates a cashless society by 2025 and states that the CBN and NSEC will co-regulate the digital currency market.
“CBN would handle payments, but the SEC would need to provide a regulatory framework since tokens are a new asset class,” the document says.