The Central Bank of Nigeria (CBN) has granted approval to the Africa Stablecoin Consortium (ASC) to launch the cNGN stablecoin in its regulatory sandbox. The stablecoin is set to be introduced on February 27, 2024, the Africa Stablecoin Consortium, a collaborative effort between Nigerian banks and fintech operators, said in a Friday blog post.
The consortium detailed that the cNGN stablecoin adheres to the regulatory requirements and standards established by the Central Bank of Nigeria, the Nigerian Securities and Exchange Commission (SEC), and the Nigerian Financial Intelligence Unit (NFIU). The consortium emphasized its commitment to engaging with regulators to ensure compliance, consumer protection, and transparency throughout the project.
Designed to Complement the eNaira
Notably, the cNGN stablecoin is designed to complement, rather than replace, the eNaira, which was introduced by the CBN with broader capabilities. The Africa Stablecoin Consortium will oversee the cNGN stablecoin, which is currently interoperable with strategic blockchains such as Bantu and BNB Smart Chain. Future plans include expanding its compatibility to encompass all major blockchain networks. The cNGN stablecoin is pegged 1:1 to the Nigerian naira, the country’s fiat currency, with its value backed by reserves held in designated commercial banks.
Its primary objective is to bridge the gap between the Nigerian naira and digital currencies in the global market by utilizing blockchain technology. One of the key advantages of the cNGN stablecoin is its potential to facilitate remittances from Nigerians abroad to their families within the country. By leveraging blockchain technology, the stablecoin enables faster and more cost-effective transfers, eliminating the need for lengthy waiting periods associated with traditional remittance processes and reducing expensive transaction fees.
Embracing Blockchain Technology
Unlike the eNaira, the central bank digital currency, the cNGN stablecoin is built on public blockchains such as Bantu, Polygon, Ethereum, BNB Smart Chain, and Tron. This allows for interoperability with various public blockchains, facilitating global transfers and expanding its usability on an international scale. Recognizing the growing global demand and adoption of cryptocurrencies, the CBN has expressed its desire for the Nigerian financial system to support and embrace blockchain technology. In a circular issued to banks on December 22, the central bank lifted restrictions on Nigerian banks facilitating cryptocurrency transactions, signaling a more favorable regulatory environment for the crypto industry.
Nigeria has witnessed significant cryptocurrency adoption, second only to India, driven by the population’s desire to hedge against the weakening local currency. The Nigerian naira has depreciated by almost 49% this year, prompting residents to seek crypto assets as a store of value. As reported, a recent survey has revealed that Nigeria is the most crypto-savvy nation ahead of the United States and European countries. Per the survey, Nigeria’s crypto awareness stands at 99% as the country leads in digital asset knowledge and perceived investment drive. The data showed that 99% were fully aware of cryptocurrencies while 70% understood the value, operations, and fundamentals of blockchain technology.
