Nigeria's central bank licenses stablecoins, bans algorithmic coins

Nigeria's central bank has pulled stablecoin issuers under direct supervision, with capital floors as high as 15 billion naira and a flat ban on algorithmic coins. The rules took effect on 5 November 2026 and cover any issuer whose tokens reach people in Nigeria.

The Central Bank of Nigeria set out the framework in a circular titled Regulations for the Operations of Non-Security Virtual Assets in Nigeria. The Block reported it on 6 November. Crypto.news and FinanceFeeds confirmed the capital figures the same day, and the document sits on the central bank's own website.

What the new rules require

Licensed issuers fall into two classes. A class 1 issuer backs a naira stablecoin one-to-one with naira assets. A class 2 issuer backs a foreign-currency coin, such as a dollar token, and can reach Nigerian users only through a company incorporated in the country. Each token needs its own approval before launch, covering its reserves, name, ticker and the blockchains it runs on.

Capital requirements are steep. A class 1 issuer must hold 10 billion naira, around 7.4 million dollars, in paid-up capital. A class 2 issuer must hold 15 billion, close to 11 million dollars. Other virtual asset firms face a 1 billion naira floor, which FinanceFeeds put at 744,048 dollars. Money set aside to meet a separate securities license does not count toward these sums.

Reserves come with rules of their own. A class 1 issuer must keep at least a fifth of its reserve pool in a deposit account at the central bank, according to FinanceFeeds, and redeem tokens at par within one business day. An approved independent auditor has to attest to the reserves. No single Nigerian bank may hold more than 30 percent of an issuer's reserve assets, a limit meant to stop one lender becoming a single point of failure.

The ban on algorithmic stablecoins

No algorithmic stablecoin will get a license. The circular defines one as a token that relies "solely or primarily on algorithmic mechanisms, including supply expansion or contraction protocols, to maintain price stability without the backing of commensurate reserve assets." In plain terms, a coin that holds its peg through code and trading incentives rather than real assets in a vault.

Regulators are guarding against a specific memory: TerraUSD, the algorithmic dollar coin that broke its peg in May 2022 and wiped out tens of billions of dollars. Licensed issuers must instead hold a reserve pool of eligible assets, and a class 1 issuer parks part of it at the central bank itself. That deposit earns no interest.

Issuers also cannot pay people to hold. Section 13.3 bars any issuer from offering "interest, yield, dividends, returns" on a stablecoin balance. Redemption must be at par in the reference currency. The rule echoes a line now drawn in the United States and the European Union, where the bloc recently named USDC its first significant stablecoin under the MiCA regime. Paying yield on a regulated stablecoin is off the table in all three.

It also blocks tokens issued by sanctioned entities or from sanctioned jurisdictions, crypto.news reported, a nod to the money-laundering worries driving regulators worldwide.

Who must comply, and by when

These rules reach beyond Nigeria's borders. They apply to foreign issuers whose tokens are "offered, marketed, distributed or made available to persons in Nigeria," even with no office in the country. That language points straight at the dollar stablecoins Nigerians already use, led by Tether's USDT.

Firms already operating get 180 days to apply for a license. They must register with the central bank within 30 days and start supervisory reporting within 60, according to crypto.news. Anti-money-laundering duties, including travel-rule checks, apply from day one.

A separate instrument, the Order on Virtual Assets Coordination 2026, sets up a body to coordinate the central bank, the Securities and Exchange Commission and other agencies. Where a token behaves like a security, the SEC keeps jurisdiction. The two regulators are meant to settle overlaps between them.

Why Nigeria is tightening the rules

In the circular, the CBN spells out its aims. It says the rules protect its monetary policy and Nigeria's foreign exchange market, and shield holders from issuer insolvency and reserve mismanagement. Behind that is a simple pressure. Years of naira weakness have pushed Nigerians toward dollar stablecoins, often through peer-to-peer trades that route around the banks.

This is the central bank's second attempt to steer that behavior. In 2021 it barred banks from serving crypto firms, a move widely reported to have slowed usage little. It mostly pushed trading onto informal channels. The new framework tries the opposite tack: bring issuers inside the tent, set the capital bar high, and supervise them.

For ordinary users, little changes overnight. The dollar stablecoins in their wallets still work. What shifts is the legal ground under the companies that issue them, and the banks and fintechs that handle them. The aim, over time, is a market where a licensed issuer stands behind the coin.

What to watch

Enforcement is the open question. A rulebook that reaches foreign issuers is only as strong as the central bank's power to police tokens that trade wallet to wallet. Rules travel badly there. Tether and Circle have not said whether they will seek a Nigerian license. The CBN named no official in the circular and did not respond to crypto.news's request for comment.

There is a clause for the big players, too. A stablecoin whose circulating supply tops 500 billion naira can be designated systemically important, which brings tighter oversight. None is close to that today. The clause reads as a bet that at least one will be.

Nigeria now joins a run of governments writing stablecoin rulebooks, from the EU to Hong Kong, where one firm is preparing a local-currency stablecoin on Solana. Watch which issuers register in the first 30 days. Watch whether the 15 billion naira floor prices out local startups and hands the market to a few big players. And watch whether the dollar coins already circulating keep moving the same way, ban or no ban.