The Central Bank of Nigeria (CBN) has approved the launch of the Nigerian naira (cNGN) stablecoin.

The cNGN, which will be launched on February 27, 2024, is powered by the Africa Stablecoin Consortium (ASC), a consortium of Nigerian financial institutions, fintechs, and blockchain experts.

Stablecoins are cryptocurrencies specifically designed to maintain a constant value. They are often pegged or tied to another currency, commodity or financial instrument.

In a statement on its website on Thursday, the ASC said the cNGN stablecoin has met the regulatory standards and requirements as established by the CBN, the Nigerian Securities and Exchange Commission (SEC), and the Nigerian Financial Intelligence Unit (NFIU).

The ASC said it is committed to enhancing secure and compliant financial interactions, revolutionising the way people transact and engage with their money securely and seamlessly.

“This ushers in a new era of financial fluidity, bridging the Nigerian Naira with the global market through blockchain technology,” the statement reads.

“Backed 1:1 by Naira reserves held in designated commercial banks, the cNGN Stablecoin transforms the Naira into a dynamic tool for worldwide remittances, commerce, trade, and investment.

“More than just a currency, cNGN shortens settlement times, enabling payments that traverse the globe swiftly, mirroring the speed of a text message and at a fraction of the cost.

“This breakthrough paves the way for instantaneous financial transactions, seamlessly connecting Nigeria’s vibrant economy with international markets and offering unprecedented efficiency in both domestic and global financial interactions.”

What can be done with the Naira Stablecoin

According to the ASC, people can pay for anything, anywhere, and at any time. With a seamless tap, users can shop the world and pay in naira without the traditional challenges of currency conversion and hefty international transaction fees.

The consortium also said “supporting your loved ones back home becomes as simple as a quick tap on your phone” with the new innovation.

“No more standing in lines. With cNGN, funds land directly in their wallets within seconds, ready to fuel their dreams and brighten their days. No more distance, no more delays, just the magic of compliant virtual assets bridging the gap between hearts,” the ASC added.

“Cut out the red tape and sky-high fees of traditional international trade. With cNGN you can send and receive payments across the globe instantly enabling you to transact with national & international partners in any stablecoin currency, fueling economic growth and global success.

“Get paid, anywhere, instantly. Ditch the limitations of location and outdated payment systems. With cNGN, you can freelance for the world, right from your desk in Nigeria. Your talent knows no borders, so why should your income? Skip the bank queues and paperwork.”

The unveiling of the cNGN is coming over two years after digital currency transactions were banned by the apex bank.

In February 2021, CBN directed deposit money banks (DMBs), non-bank financial institutions (NBFIs), and other financial institutions (OFIs) to close accounts of persons or entities involved in cryptocurrency transactions within their systems.

The regulator further warned local financial institutions against dealing in crypto assets or facilitating payments for crypto exchanges, citing money laundering (ML), terrorism financing (TF), cybercrime, and the volatility of cryptocurrencies as reasons for the ban.

However, the apex bank on December 22, 2023, issued fresh operational guidelines on virtual assets service providers (VASPs) to all banks and OFIs — signalling a shift from its initial position which restricts crypto transactions.

VASPs are entities that conduct exchanges between virtual assets (cryptocurrencies) and fiat currencies and transfers of virtual assets.

The Cable

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TECHDIGEST – Facebook has launched a long-awaited pilot of its digital currency wallet Novi in the US, but has chosen to use the Paxos Dollar stablecoin after its own cryptocurrency Diem failed to get backing from regulators.

In a blog post on Tuesday, David Marcus, head of Facebook’s Novi wallet, announced that the company had started the pilot in parts of the US, as well as Guatemala.

Users could download the app on iPhones or Android and register with a government-issued ID, said Marcus, adding that transferring money between wallets would be free. Coinbase, the US cryptocurrency exchange, is providing custody services for Novi.

Andreessen Horowitz, the venture capital firm, is an investor in Coinbase, and Marc Andreessen, its co-founder, sits on Facebook’s board.

The decision by Facebook to use an existing stablecoin rather than Diem, which Novi was originally designed to hold, reflects the difficulties in getting the latter Facebook-initiated project off the ground.

The sector as a whole has faced questions over consumer protection, money laundering and monetary stability. But regulators have expressed particular concerns over the scandal-hit social media giant operating its own currency since it announced the initiative in 2019, alongside a group of backers that include tech businesses and non-profit organisations.

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TECHDIGEST – The CBN recently sent a presentation to Nigerian banks about the eNaira project, revealing more details about its design and operational module. As seen by Nairametrics, the presentation described how the new currency would be designed and operated.

In fact, the report states that the e-Naira is a legal tender for the entire country. The report also mentions that it will have non-interest-bearing CBDC status, a transaction limit for customers, and a value-based transaction limit.

Participants in the e-Naira program are featured in five stages, including:

Monetary Authority Suite; The Central Bank will be handing the first product component that includes issue, distribute, redeem and destroy the currency. Store data on a cloud server, monitor and analyse currency transactions.
Financial Institution Suite; licensed financial institution will be able to request currency or issue stablecoins, manage digital currency across branches, KYC, identify and AML compliance capability.
eGovernment Suite; the government will b able to efficiently process digital payments sent to and received from citizens and businesses.

Merchants will provide low-cost payment and business management software, POS, remote payment solutions, online capabilities, transaction analysis and reconciliation.

Retail Consumer Suite; features user-centred designs for a great user experience. The architecture will be expandable to enable innovation; features advanced privacy and security.
Consequently, the proposed transaction cost for the e-Naira wallet was also outlined by the Nigerian Central Bank.

The digital currency infrastructure does not charge for user-to-merchant transactions and P2P wallet transactions.
It shall be the responsibility of Nigerian banks to promote and market the centrally issued digital currency as a cash alternative to existing and potential customers in support of the Nigerian apex bank’s goal for financial inclusion.

In order to catalyse the adoption of the e-naira, banks will facilitate onboarding and provide world-class customer service.

Nigerian banks will be allowed to invite all their customers to register for the e-Naira. Besides pre-generated codes, the banks can send invitation codes for onboarding to a specific list of selected customers. Onboarding will be done for customers who have a code assigned by their banks. The banks have already validated and verified these customers.

Moreover, the Central Bank stated the wallet provided by its institution was merely a stop-gap measure for meeting the deadline, given that banks and other licensed operators may provide their own wallets since it didn’t intend to compete against the banks.

As part of the digital currency initiative, Nigeria’s central bank has made clear that NIBSS and other switching platforms will still be relevant, existing infrastructure can be integrated and leveraged in the e-Naira implementation.

As a National Critical Infrastructure, the e-naira system will be subject to comprehensive security checks, all data and personally identifiable information (PII) will be kept off the ledger and will not be stored on the ledger.

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