In a bid to stay ahead of emerging risks, the apex bank has launched a pilot supervisory programme focused on selected Virtual Asset Service Providers (VASPs).

Behind this move lies a deeper concern: safeguarding the financial system from the shadows of money laundering, terrorism financing, and proliferation threats. With the digital asset space evolving at a rapid pace, the CBN’s initiative signals a proactive effort to understand and manage the risks shaping this new financial frontier.

The initiative, anchored on existing legal frameworks including the Money Laundering (Prevention and Prohibition) Act 2022 and the Banks and Other Financial Institutions Act 2020, signals a more structured regulatory engagement with operators in the virtual asset ecosystem.

CBN in a statement said the pilot forms part of its broader risk-based supervisory strategy designed to “strengthen financial system stability and market integrity oversight of virtual asset-related activities within the Bank’s mandate.”

It noted that the exercise is not a shift in policy direction regarding digital assets but rather a supervisory engagement to deepen its understanding of emerging risks and operational models.

“This pilot does not alter, replace or supersede the existing regulatory framework governing virtual assets in Nigeria or the mandates of other competent authorities,” the CBN stated.

Consequently, it selected industry players for the initial phase which include Flutterwave, Paystack, KuCoin, alongside cNGN, Juicyway and KoinKoin.

The central bank noted that the programme is designed to build “a structured understanding of AML/CFT/CPF risks, business models, and operational practices across participating entities,” while also supporting firms to strengthen compliance frameworks in line with global standards.

In particular, the pilot aligns with recommendations of the Financial Action Task Force, especially around the implementation of the Travel Rule, which mandates transparency in cross-border digital asset transactions.

Participants in the pilot are expected to submit monthly compliance reports and key performance indicators, undergo detailed reviews spanning governance, customer onboarding and transaction monitoring, and demonstrate readiness to implement global compliance standards.

The apex bank further stressed that “participation in the pilot is strictly supervisory and does not confer any regulatory status, approval, licensing right, or authorisation on participating entities,” underscoring its cautious approach to the still-evolving sector.

The pilot will run in phases, with subsequent cohorts already scheduled, as the central bank intensifies efforts to close regulatory gaps and align Nigeria’s financial system with international best practices.

While the Africa Stablecoin Consortium (ASC), the token’s developer, has initiated discussions with Roqqu and Yellow Card, neither platform has committed to listing it.

Despite cNGN’s approval under Nigeria’s SEC Accelerated Regulatory Incubation Programme (ARIP) and its availability on Busha and Quidax, its wider adoption hinges on securing listings on platforms with a pan-African reach. Without that, the stablecoin’s use in remittances and cross-border transactions is still not certain.

Jason Marshall, chief operating officer of Yellow Card, acknowledged ASC’s regulatory approval but stressed that listing decisions require more than compliance. “We have a lot of respect for any project that has been admitted to Nigeria’s SEC Accelerated Regulatory Incubation Programme (ARIP); we take it seriously,” he said. However, he noted that Yellow Card is selective, with a focus on demand, financial reserves, and compliance.

“Before we would consider a coin most times, they would have raised the equivalent of ₦50 billion ($32.5 million) in capital reserves and have an accounting firm sign a document saying it validates those reserves,” Marshall explained. “We would expect them to be well-capitalised to back the coin.”

The main challenge for cNGN isn’t just getting listed, but proving that users actually want it. In Nigeria, digital transactions via traditional banking channels are already fast and cheap. This makes some exchanges sceptical about the stablecoin’s domestic relevance. 

“For domestic use cases within Nigeria, I’m not sure because the Naira is already digital,” Marshall admitted. “The Nigerian bank transfer system is very advanced; transfers are instant and low-cost, but we’re open-minded to domestic use cases—we’re just unsure as of yet.”

Roqqu’s CEO, Eseoghene Onomor, also confirmed talks with ASC but noted the same concerns. “These things take time,” he said. “It’s not enough to list a coin or token on your platform. It has to be something that people want. Not everyone is seeing the value of the cNGN right now, because adoption is low, but I see its value.”

This brings a catch-22 for ASC: without exchange listings, cNGN’s adoption will be slow, however, exchanges want evidence of demand before listing it. 

While the stablecoin’s likelihood to enable seamless swaps between African currencies exists, its immediate viability is still questioned Unless it gains stronger institutional backing or a clear market need emerges, Nigeria’s first compliant stablecoin could remain on the sidelines of Africa’s crypto economy.

A Financial Expert and an Investment Relation Professional has extolled the Federal government of Nigeria on the proposed stablecoin – cNGN, set to be launched of 27th February, 2024.

They also highlighted the numerous economic benefits deliverable from the proposed virtual asset.

Dr. Bunmi Bewaji, an expert in taxation, who spoke to Techeconomy on the proposed virtual asset – cNGN- noted that although the previous administration banned cryptocurrency transactions by banks which drove people away from the open market, virtual assets cannot be ignored.

According to the University of Leeds Alumni;

“It is a good thing. Although, the policy shift is riddle with some inconsistencies, we cannot ignore the virtual assets. Because, an outright ban as it was done by the previous administration drives people away from the open market to a kind of darkroom trading. The opacity of that operation could lead to it been used for criminality, Terror financing and all of that, so its good thing to bring in the much- needed transparency’.

He also noted that the stable coin will allow the Central Bank of Nigeria to set the rules, monitor the markets and address infractions and abuses that may emanates from Virtual Asset in the country, whilst creating an avenue for the government to generate more revenue.

He however, charged the Apex Bank to be consistent in its policy making. “Only yesterday, the CBN placed an outright ban on cryptocurrency.

And people need to go to the bank and fill a form saying I do not hold any asset in cryptocurrency. But here you are now saying CBN is launching E-naira and then now the stable coin.

Also in his reaction to the development, Afolabi Oriyomi, the country relations and investment professional at AFC, noted that just like the country is ranked 6th globally in cryptocurrency trading, the stablecoin can boost Nigeria enhance the derive towards financial inclusion  and international accessibility.

He noted that Nigeria’s current financial inclusion at around 74%, far from the 95% target by 2024, as well as the expensive fees of about 8% associated with traditional international transactions (cross-border payments) and the Naira depreciation against the developed currencies, the Central Bank of Nigeria’s (CBN) move towards adopting stable coins, specifically the cNGN, is a positive step to address these issues.

He said, Nigeria is ranked 6th globally in cryptocurrency market transactions, amounting to $400 million. Introducing a stable coin could channel this volume into the formal financial system.

Additionally, creating a stable coin would enhance international accessibility to the Naira, aligning with the global trend of increasing demand for digital assets.

He however, noted that its success will depend mainly on a well-designed regulatory framework, responsible implementation by both public and private actors, as well as practical financial literacy programs

Recall that the eNaira was launched in October 2021 to counter the growing influence of cryptocurrencies. It was launched in the same month that the CBN prohibited banks from providing financial services to cryptocurrency businesses; they were not allowed to operate an account in banks and other financial institutions.

The central bank also ordered the closure of all bank accounts owned by cryptocurrency businesses, effectively crippling the operations of crypto exchanges.

The eNaira began its life with a public perception that it was created to make redundant an industry that many have come to embrace. Also, there was an industry perception that the creation of the eNaira did not take into consideration the input of industry stakeholders.

The CBN contracted a foreign company, Bitt Inc, to develop the blockchain eNaira was built on. In fairness, the company had an antecedent of building CBDC.

In 2019, the Barbados-based fintech firm signed a contract with the Eastern Caribbean Central Bank to test a blockchain based CBDC inside the Eastern Caribbean Currency Union. But their expertise notwithstanding, many Nigerians felt it was a slight on the Nigerian tech ecosystem to go for a foreign company.

Apart from that, some experts argued that the contract violated Executive Order No 5 signed into law in February 2018 by the then president Muhammadu Buhari.