Central Bank Of Nigeria Approves Naira Stablecoin For 2024 Launch

On Jan 4, the Africa Stablecoin Consortium announced that the Central Bank of Nigeria had greenlit their cNGN Naira stablecoin project under the CBN’s regulatory sandbox.

Following the ASC’s recent press release and website launch, it’s worth going over new information they’ve shared, including their clarification that they’ll communicate a launch date once they’ve “received further guidance and approvals from all regulatory bodies, partners, and stakeholders.”

The Compliant Naira Stablecoin

To recap, the cNGN stablecoin (aka the compliant Naira stablecoin) is a Naira stablecoin that is pegged 1:1 with the Nigerian Naira and will be the first compliant Naira stablecoin.

The ASC has stated that they intend to work fully with regulators from the CBN, Nigerian Securities and Commodities Exchange, and the Nigerian Financial Intelligence Unit to ensure they remain compliant, transparent, and prioritize consumer protection. Moreover, the ASC’s reserves will be audited by third-party auditors every quarter, with monthly attestations and daily published records of the ASC’s total assets and reserves.

As for the general mechanisms of the cNGN, the ASC creates new cNGN tokens each time a user makes a Naira deposit to ASC reserve bank accounts held at their partner commercial banks. Additionally, users can withdraw their cNGN for Naira, and at this point, to maintain the 1:1 peg to the Naira, the ASC destroys the tokens.

The ASC’s Plans For The cNGN

The ASC intends for the cNGN to complement the eNaira and act as a bridge between fiat and digital assets to facilitate fast, secure, and cross-border trade denominated in the Naira and become a cheaper and more efficient remittance rail for Nigerians in the diaspora and a lifeline for the unbanked by being compatible with vouchers, agency banking, and USSD.

Presently, cNGN is interoperable with the BNB Smart Chain and Bantu network, with the intention of expanding into other major chains like Tron and Ethereum in the coming months. The ASC also clarified that cNGN is minted on the Bantu network and made “available on every other public blockchain through the Automated Multi-chain Transfer Protocol (AMTP).”

Bitcoin, eNaira, cNGN And Nigeria’s Economy

Nonetheless, it is challenging to envision the Naira as a base currency peg for a stablecoin, given its significant volatility and continued devaluation against more stable currencies like the US Dollar vis-à-vis other African currencies. Nonetheless, it’s too early to say if the cNGN will follow the eNaira’s fate.

There is still optimism that some of the economic challenges and woes faced by Nigeria in 2023 will be eased in 2024 through the ongoing economic reforms by the federal government, currency controls, and other actions by the CBN, and the anticipated potential role of the cNGN.

As it stands, Nigeria now leads in crypto regulation in Africa. However, there are still outstanding questions regarding the effects of the CBN’s strict KYC and AML regulations on individuals and businesses in the ecosystem, as issued in their recent guidelines and what that means for innovation and the ecosystem at large.

Regardless, bitcoin’s position remains resolute. With the continued growth of Nigeria’s world-leading bitcoin adoption, global dominance of crypto P2P exchange volumes (over $56.7B in 2023), influx of new bitcoin companies, and strides in renewables bitcoin mining, the year will be dominated by further developments across its value chain.

Further, these developments will likely continue to impact the Nigerian economy, especially as capital pours in from local and global investors due to the above and anticipated positive bitcoin price action over the coming months as they seek exposure to these opportunities in their portfolios.

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