Nigeria bans algorithmic stablecoins and licenses tokenized deposits

Nigeria's central bank put stablecoins and tokenized bank deposits under a licensing regime on November 5, with rules that ban algorithmic stablecoins outright and demand up to 15 billion naira (about $11.1 million) in paid-up capital from anyone issuing a dollar-pegged coin in or into the country. The Regulations for the Operations of Non-Security Virtual Assets arrived by circular, reference number PSP/DIR/PUB/CIR/001/004, dated November 5 and signed by the Director of Payments Systems Policy, Musa Jimoh, as Vanguard News reported. They took effect immediately.

The capital tiers work like this, per Cointelegraph's breakdown of the rules: Class 1 licences, for naira-referenced stablecoins, require 10 billion naira (about $7.4 million) in paid-up capital. Class 2, for foreign-currency coins like USDT or USDC, requires 15 billion naira. Other virtual asset service providers, meaning exchanges, custodians, wallets and payment processors, need 1 billion naira (about $742,000). Existing operators have 180 days to apply for licences.

The reserve rules are the part issuers will feel

Full backing is the baseline. Issuers must hold reserve assets equal to every token outstanding plus a buffer of at least 2%, according to Cointelegraph. At least 40% of reserves must be cash or qualifying highly liquid assets. Naira-pegged issuers have an extra twist: a reserve deposit account at the CBN itself holding no less than 20% of total reserve assets, per Legit's review of the framework. Redemption must be honored at par, and FinanceFeeds notes the rules cap the process at one business day.

Three prohibitions round it out. Algorithmic stablecoins are banned, specifically coins that hold their value through automated supply adjustments rather than eligible reserves. Tokens backed mainly by other cryptocurrencies are out too, as are tokens without enforceable redemption rights, per Legit. And issuers cannot pay interest or yield to holders, or market their coins as deposits with deposit-insurance protection.

The scope is what makes this more than a stablecoin story. The framework covers what the CBN calls Deposit Money Tokens, tokenized bank deposits, alongside both stablecoin classes and any other token the bank designates as payment-relevant. Vanguard quotes the circular's own framing: tokenized payment instruments present opportunities in "payments, remittances, settlement, and digital commerce" but carry risks to "financial stability, monetary policy, consumer protection, illicit finance, operational resilience, and foreign exchange management." Any bank wanting to sell a deposit token to Nigerian customers now needs a Nigerian entity, a CBN licence, and capital parked in the country. Vanguard stresses the circular's line that there is "no offshore issuer exemption from incorporation, licensing or capital."

Why this matters for tokenized deposits specifically

RWA coverage tends to mean treasuries and private credit, and stablecoins get treated as a parallel market. Nigeria just merged the two by regulation. Deposit Money Tokens are the same kind of instrument banks are piloting in Europe and the US: a bank liability on a ledger, payable at par. The CBN is, as far as the published text goes, the first African central bank to write a licensing category specifically for them, with capital, reserve segregation and daily-reconciliation style obligations attached.

My read, and this is opinion: the interest test is redemption, not paper. Nigeria has form here. The central bank spent years restricting banks' crypto dealings, Binance shut its naira services in March 2024 amid government scrutiny, and the relationship between Abuja and the crypto industry has been adversarial for most of the past five years, as Cointelegraph's history of the dispute recounts. A licensing framework with capital floors and redemption deadlines is the opposite posture, and the gap between "we will license you" and "you will actually be licensed" is where frameworks like this usually die.

Two concrete things to watch. First, who applies within the 180-day window, which closes around the first week of May 2027. Nigeria is one of Africa's largest crypto markets, and USDT circulates there in serious volume; if no naira-referenced issuer files by spring, the Class 1 tier will be a regulator without a market. Second, watch the definition creep. The circular lets the CBN designate additional tokens as payment-relevant at its discretion. That clause is a bridge to covering tokenized treasuries or fund units sold as payment instruments without any new rulemaking.

The rules do not touch securities tokens, which stay under the authority of Nigeria's SEC, per FinanceFeeds. The line between a yield-bearing tokenized fund and a yield-bearing stablecoin is exactly where issuers will try to live, and the CBN's interest ban says it already knows that.