Nigeria Bans Algorithmic Stablecoins in New Crypto Rules

The Central Bank of Nigeria (CBN) has brought stablecoin issuers, crypto exchanges, custodians and crypto payment providers under a new licensing regime, and banned algorithmic stablecoins outright.

The CBN issued the Regulations for the Operations of Non-Security Virtual Assets on Thursday, 5 November 2026, and the rules took effect immediately, Cointelegraph reported. Firms already operating have 180 days to apply for a licence or authorisation.

Stablecoin issuers must now back every token in full with reserve assets, plus a buffer of at least 2%. They also need minimum paid-up capital of ₦10 billion (about $7.4 million) for naira-backed tokens and ₦15 billion (about $11.1 million) for tokens tied to foreign currencies. Tokens that hold their peg mainly through algorithms, or that give holders no enforceable right to redeem, are now prohibited.

Who needs a licence

Any firm that issues, exchanges, holds in custody or moves regulated tokens for people in Nigeria now needs a CBN licence, according to the regulations. The rules reach operators with no office in the country if they serve Nigerian users or affect its payments system, financial sector or foreign exchange market, The Block reported.

The framework sets out these licence types and capital floors:

A separate Deposit Money Token Licence covers banks that issue tokenised deposits.

Dollar stablecoins must go local

A stablecoin tied to a foreign currency can be offered to Nigerians only as a Class 2 token issued by a Nigerian-incorporated company holding a Class 2 licence. The rules state that a foreign licence or a deal with a local intermediary cannot replace that licence. Nairametrics reported that the issuer must also keep a staffed physical office and effective management in Nigeria.

Issuers need written approval for every token before issuing it. That approval covers its class, reference currency, reserves, name, ticker and supported blockchains, according to The Block.

Class 2 issuers must also hold separate operational liquidity in Nigeria to meet local redemptions. Under Section 11.3.1 that is the highest of $10 million, 15% of Nigeria-linked liabilities, or 30 days of stressed outflows, CoinAfrica reported.

Reserve rules

• Full backing plus a buffer: reserves must cover every token at par, plus overcollateralisation of at least 2%.

• Liquidity: at least 40% of the reserve pool must be cash or high-quality liquid assets, with non-cash holdings maturing within six months.

• Redemption: holders get an enforceable right to redeem at par, generally by the end of the next business day and without standard fees, according to CoinAfrica.

• No yield: issuers may not pay interest, yield or other returns to holders, and may not use partners to get around this.

P2P trading

There is no standalone P2P licence. Platforms that match buyers and sellers need an Other Services Licence or equivalent, plus express CBN approval for the P2P service. Before releasing tokens, the platform must check that the name and Bank Verification Number on the naira account match the verified customer.

All licensees must run customer due diligence, sanctions screening, transaction monitoring and Travel Rule checks, The Block reported.

What is banned

Section 2.2 of the regulations lists five categories of "Prohibited Tokens" that may not be issued, offered, distributed or traded in Nigeria:

• Algorithmic stablecoins: tokens that hold their value solely or mainly by adjusting supply or demand, rather than full backing by eligible reserve assets.

• Crypto-backed fiat tokens: tokens that reference a fiat currency but are backed wholly or mainly by other virtual assets.

• Sanctioned issuers: tokens issued by, or for, a sanctioned person or someone in a sanctioned jurisdiction.

• No redemption right: tokens marketed as stablecoins that do not give holders an enforceable right to redeem at par.

• Catch-all: any other token the CBN decides poses an unacceptable risk to monetary or financial stability, financial integrity or consumers.

Anyone who issues, offers, distributes or facilitates access to a prohibited token faces the enforcement measures in Part 11 of the rules. Promoting a prohibited token, or an unlicensed service, is also barred.

The CBN says it will classify tokens by their economic substance and risk, not by their name, marketing or technology. In its introduction, the bank cites risks to financial stability, monetary policy, consumer protection and foreign exchange management. It said the framework aims to support responsible innovation while protecting consumers and financial stability, according to Cointelegraph.

Algorithmic designs have a troubled record. Terra's UST, the best-known example, lost its dollar peg and collapsed in May 2022.

From bank ban to licensing

The rules mark the CBN's biggest step into crypto oversight since it barred banks from serving crypto exchanges in February 2021. The CBN says it issued them under the Presidential Executive Order on Virtual Assets Coordination, 2026.

That order, signed in July, set up a virtual asset council to coordinate regulators. It did not create a new regulator or move powers between agencies, Cointelegraph reported. Under the new split, the CBN oversees tokens used for payments, transfers, remittances, foreign exchange and settlement, while the Securities and Exchange Commission (SEC) keeps securities and capital-market activity. Firms that work across both need approval from each regulator, according to The Block.

Africa's biggest stablecoin market

Nigeria received about $59 billion in crypto inflows between July 2023 and June 2024, according to the IMF. The fund says Nigeria accounts for roughly 60% of sub-Saharan Africa's stablecoin inflows since 2019. It ranked second on Chainalysis's 2024 Global Crypto Adoption Index and sixth in 2025.

In June, the IMF warned that heavy use of dollar stablecoins can work like digital dollarisation and weaken monetary policy. It recommended that Nigeria clarify how it treats stablecoin issuers and align with frameworks in the EU, Singapore, Hong Kong, Japan and the US.

Industry reaction

Early reaction has welcomed the clarity but questioned the cost, CoinAfrica reported.

Laolu Samuel-Biyi, co-founder of Nigerian exchange Busha, called the rules an important step towards regulatory clarity. Busha recently launched NGNb, a naira-backed stablecoin. He argued that fully reserved issuers carry a different risk profile from banks, and that the capital floors could make local issuance "commercially unviable." He also said the minimum penalties look harsher than those for other financial institutions.

Rume Ophi, a Nigerian crypto industry figure, backed the algorithmic ban and welcomed the local-presence rule for foreign issuers. He cautioned that the capital requirements could shut out smaller Nigerian issuers, and that existing operators may struggle to raise capital within the transition period.

What happens next

Firms already operating face three deadlines under Section 54.1 of the regulations. The dates below are counted from the 5 November start date.

Until then, existing operators may continue only at their current scale and under the CBN's interim conditions. Anti-money laundering rules apply from day one. A firm that misses the application deadline must stop the activity until it is licensed, and existing P2P platforms must apply within the same window.

Dollar stablecoins face an extra hurdle. Existing arrangements for foreign-currency tokens need the CBN's express interim permission to stay available, and the regulations say this does not create a permanent exemption. Class 2 tokens may also be distributed only through CBN-licensed or authorised firms, according to CoinAfrica.

Open questions

• Tether and Circle: the Nigerian Tribune reported that Tether advertised for a Nigeria expansion manager in August, and that Circle recently named Gillian Darko its vice-president and head of Africa. Blockrora found no public statement from either company on the new rules as of 7 November.

• Capital levels: the CBN can raise or revise capital requirements by circular. Local issuers such as Busha have already pushed back on the current floors.

• Testing ground: the CBN opened a second regulatory sandbox cohort in August with a dedicated track for stablecoin issuers, the Tribune reported.