The Central Bank of Nigeria (CBN) has prohibited stablecoin issuers from paying interest, dividends, yields or other financial returns to holders of payment stablecoins, while introducing mandatory documentation requirements for cross-border transactions involving foreign-currency-backed digital assets.
The apex bank also directed that payments for imported goods made using foreign-currency stablecoins must be supported by a valid Form M, as part of measures to subject virtual asset transactions to Nigeria’s existing foreign-exchange regulations.
The requirements were contained in the Regulations for the Operations of Non-Security Virtual Assets in Nigeria, released by the CBN on Friday, which established rules governing the issuance, backing, redemption and use of stablecoins, as well as the activities of related service providers.
Under the regulations, stablecoin issuers are expressly prohibited from providing financial returns to individuals merely for holding or depositing their tokens.
Section 13.3 of the regulations states: “An issuer shall not pay, offer, arrange or facilitate interest, yield, dividends, returns or other financial benefits to holders by reason of holding or depositing its stablecoin.”
The provision also prohibits issuers from using intermediaries or other arrangements to avoid the restriction.
“A service provider shall not be used to circumvent this prohibition,” the CBN declared.
The restriction extends to exchanges, wallet providers, distributors and other intermediaries involved in stablecoin transactions.
Section 27.7 reinforces the prohibition, stating that “Issuer-specific disclosures, redemption protections and the no-yield rule shall not be diluted by use of an intermediary.”
The apex bank further directed stablecoin issuers to inform prospective buyers in writing that ownership of a payment stablecoin does not entitle the holder to interest, yield or any other financial return.
Issuers must also disclose that stablecoins do not enjoy the same protections as conventional deposits maintained with licensed banks.
According to the regulations, the required disclosure must state that the token “is not a bank deposit and is not covered by the Nigeria Deposit Insurance Corporation (NDIC) guarantee scheme.”
The CBN explained that a qualifying payment stablecoin must give its holder the right to redeem the token at par in the currency to which its value is linked, without providing additional investment benefits.
In defining stablecoins that fall outside securities regulation, the framework describes a qualifying token as one that “confers on its holder no right other than a right of redemption at par in the reference currency and no interest, return or other financial benefit.”
The regulations distinguish payment stablecoins from digital assets structured to generate investment returns.
According to the CBN, products offering yields or other financial benefits to their holders cannot be treated as payment stablecoins under the framework.
“A return to holders makes the product an investment. It is prohibited as a payment stablecoin,” the regulations state.
The products identified as falling outside the payment-stablecoin category include yield-bearing tokens, tokenised money market funds and staking-return products.
Beyond the prohibition on returns, the apex bank introduced requirements intended to safeguard the assets backing stablecoins and protect holders seeking redemption.
Section 13.4 prohibits issuers from deploying stablecoin reserves for activities unrelated to their prescribed backing function.
“Reserves shall not be used for operating expenses, lending, staking, collateral for borrowing or other prohibited leverage or encumbrance,” the regulations provide.
The requirement means that assets maintained to support stablecoins must not be diverted to finance an issuer’s operational expenditure or used as security for borrowing.
The CBN also imposed conditions governing the redemption of stablecoins and the creation of additional tokens.
Under Section 13.5, redemption “shall remain available at par, within the prescribed period and without standard redemption charges.”
The regulations further provide that “No new tokens shall be minted unless equivalent Eligible Reserve Assets have been received.”
The provisions are intended to ensure that issuers maintain the necessary assets to support tokens placed into circulation and honour redemption obligations.
On international transactions, the CBN introduced documentation requirements for the use of stablecoins in payments for imported goods and services.
Section 11.10.5(a) states: “A payment for imported goods made in a Class 2 Stablecoin shall be supported by a valid Form M. A payment for imported services shall be supported by the documentation required under the FX Regulations.”
Class 2 stablecoins are digital tokens linked to foreign currencies, including the United States dollar.
Under the new framework, businesses using such stablecoins to settle import transactions must comply with the documentation requirements applicable to the underlying foreign-exchange transactions.
The regulations also require the licensed service provider handling the payment to retain the relevant documentary reference.
According to the CBN, the licensee must “record the reference in the transaction record and pay only the foreign supplier or its VASP.”
A VASP is a Virtual Asset Service Provider.
The requirement restricts the destination of qualifying import payments to the foreign supplier or the supplier’s virtual asset service provider.
The CBN also established that the use of a digital asset does not exempt a transaction from the foreign-exchange rules that would ordinarily apply if payment were made through conventional banking channels.
Section 11.10.2 provides that a cross-border virtual asset transaction “shall be treated as a foreign-exchange transaction of the corresponding current-account or capital-account category.”
It further states that such transactions are “subject to the same eligibility, documentation, reporting and settlement requirements as the equivalent transaction in foreign currency.”
The apex bank consequently requires licensed virtual asset firms to observe the same standards applicable to authorised foreign-exchange dealers when facilitating cross-border transactions.
Section 11.10.3 states that a licensee “shall not carry out a Cross-Border Virtual Asset Transaction on documentation, verification or reporting less than would be required for the equivalent transaction through an Authorised Dealer.”
The regulations also limit the circumstances under which licensed firms may process cross-border stablecoin payments.
Under Section 11.10.4, a firm may process a transaction only where it falls within the scope and conditions of its approval to conduct cross-border activities.
In addition, the underlying purpose of the payment must be permitted under the applicable foreign-exchange regulations.
The framework equally establishes requirements for exporters receiving proceeds through foreign-currency-backed stablecoins.
Section 11.10.5(b) provides that where export proceeds are received in a Class 2 stablecoin, the transaction must reference the relevant Form NXP.
The CBN also clarified the circumstances under which export earnings received in stablecoins would be regarded as repatriated to Nigeria.
According to the regulations, such proceeds would be treated as brought home only when they are redeemed or converted and credited to the exporter’s export-proceeds domiciliary account with an authorised dealer within the period prescribed by the foreign-exchange regulations.
The apex bank specifically rejected the idea that retaining export proceeds in a digital wallet would satisfy the repatriation requirement.
“Holding the export proceeds on-chain in a wallet, in Nigeria or elsewhere, shall not constitute repatriation,” the regulations state.
The requirement means that exporters cannot rely solely on the receipt or continued custody of foreign-currency stablecoins in a digital wallet as proof that export proceeds have been repatriated.
The proceeds must be converted or redeemed and credited to the appropriate domiciliary account within the applicable regulatory timeframe.
To strengthen oversight of cross-border virtual asset activities, the CBN also introduced transaction reporting obligations for licensed operators.
Section 11.10.12 requires cross-border transactions to be reported through the prescribed regulated gateway.
The required information includes the purpose code, Form M, Form NXP or electronic Certificate of Capital Importation (eCCI) reference, where applicable.
Other required details include the transaction corridor, counterparty VASP identifier, wallet type, fiat and token components of the transaction, and applicable exchange rate.
Licensed firms are additionally required to submit monthly summaries of their cross-border transactions.
The reports must contain “monthly aggregates by corridor, purpose, token and direction” to support foreign-exchange and balance-of-payments monitoring.
The reporting requirements are intended to enable the CBN to monitor virtual asset transactions involving international payments and assess their implications for Nigeria’s foreign-exchange system.
The regulations also establish financial penalties for operators that fail to comply with the prescribed obligations.
For paying prohibited interest, yield or other financial benefits to stablecoin holders, the applicable fine is equivalent to twice the amount of the prohibited payment or benefit.
Operators that unlawfully use stablecoin reserves as collateral or engage in prohibited leverage face heavier sanctions.
According to the CBN, the fine for such violations shall be “not less than two hundred and fifty million naira (N250,000,000) and not more than five hundred million naira (N500,000,000) per breach.”
The framework also imposes sanctions for failures involving suspicious transaction reporting and customer due diligence.
A licensee that fails to file a required suspicious transaction report or carry out the prescribed customer due diligence faces a fine of not less than ₦50 million per breach.
Such operators may also be required to make restitution of amounts processed in violation of the relevant obligations.
The penalties are designed to reinforce compliance with the requirements governing virtual asset operations, financial transparency and the protection of customers.
For businesses already operating in the sector, the CBN provided a transitional period for regularisation.
Existing operators are required to apply for a licence within 180 days from the commencement of the regulations.
The requirement brings existing service providers within the licensing framework established for non-security virtual assets.
According to the CBN, the regulations are intended to encourage safe innovation in Nigeria’s digital financial ecosystem while protecting consumers and safeguarding the stability of the monetary and payment systems.
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