Nigerian banks to develop stablecoin in an attempt to regulate crypto activities

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December 23, 2023
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2 min read
Some coins and notes
  • Authorised Nigerian banks will collaborate to create and manage cNGN, a new stablecoin, following the lifting of the crypto ban. 
  • Sources that spoke to Nairametrics said that the financial initiative will be built and executed on an African blockchain that will be launched in January 2024. 

Stablecoins are cryptocurrencies with values tied to those of an existing fiat currency, commodity, or financial instrument (contracts for monetary assets that can be created, bought, traded, modified, or settled for). 

Similarly, the value of each cNGN token will maintain a one-to-one peg with every Naira (₦1) held by all banks in the country. 

Expected to maintain the typical functionality of major stablecoins like Tether (USDT), USD Coin (USDC), and Binance USD (BUSD), the cNGN token will have interoperability capabilities with other public blockchains. This will allow it to expand its utility beyond Nigeria by seamlessly facilitating global transactions. 

To execute the cNGN project, the key partners will include commercial banks like First Bank, Access Bank, Sterling Bank, and Providus Bank; payment infrastructures like Kora (formerly Korapay), Interswitch, and Budpay; and Blockchain consultants like Interstellar (Blockchain infrastructure company) and Convexity (Blockchain consultants). This will mark a significant collaboration in Nigeria’s financial sector. 

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The Central Bank of Nigeria (CBN) mandated that commercial banks and other financial institutions with licences cease handling transactions for cryptocurrency exchanges in February 2021. 

The following weeks saw Nigerian financial institutions freeze the accounts of all persons and entities found making cryptocurrency transactions or operating a cryptocurrency exchange.

On December 22, 2023, the CBN lifted the ban on crypto transactions in Nigeria, citing the need to regulate the activities of crypto companies following prevailing global trends as the reason. If the ban had persisted, it would have rendered the cNGN project impossible, inadvertently limiting the financial possibilities made available by crypto. 

The CBN prohibited cryptocurrency activities the same year it introduced the eNaira, a Central Bank Digital Currency (CBDC) distinct from the cNGN stablecoin. This move gave most Nigerians the impression that the apex bank was making room for the eNaira by stifling its competition. Some analysts believe that this largely contributed to the failure of the CBDC. 

While it’s still too early to tell, the development of the cNGN token raises questions about the fate of the eNaira, which has seen minimal adoption. 

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Besides commercial banks, it’s unclear which individuals or institutions will have access to the stablecoin.  

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