Nigeria bans algorithmic stablecoins and introduces licenses

Nigeria's central bank on Thursday issued rules for crypto companies that take effect immediately. Stablecoin issuers must fully back their tokens with reserves, and the country bans algorithmic stablecoins. The rules hit exchanges, custodians and payment services in one of Africa's largest crypto markets.

What exactly was adopted?

The document is called Regulations for the Operations of Non-Security Virtual Assets. It covers stablecoin issuers, crypto payment providers, exchanges, custodians and other service providers. The rules took effect at once, but existing operators get 180 days to apply for a license or authorization.

The regulator said the step aims to support responsible innovation while protecting consumers and financial stability. It follows President Bola Tinubu's July executive order, which was meant to coordinate oversight between agencies without changing their powers.

What are the requirements for stablecoin issuers?

Reserves must cover the full amount of tokens issued, and on top of that issuers need a buffer of at least 2% of the tokens' value. At least 40% of reserves has to sit in cash or qualifying highly liquid assets. For comparison, the US OCC adopted a similar 1-to-1 principle for its own issuers last month.

• Reserves: full coverage plus a 2% cushion.
• At least 40% of reserves in cash or liquid assets.
• The token must give the holder an enforceable right of redemption.
• Stablecoins that rely mainly on algorithms rather than reserves are banned.

How much does it cost to enter the market?

The regulator tied admission to paid-up capital. The riskier the business, the higher the bar.

For big players like Tether or Circle these sums are not critical, but for local startups the bar is high. Issuing a dollar-linked stablecoin is especially expensive, because that is the type Nigeria sees as riskier.

Why ban algorithmic tokens?

An algorithmic stablecoin keeps its peg not through reserves but through code and demand for a companion token. When trust disappears, the mechanism breaks and the price of the "stable" coin falls close to zero. That is what happened to TerraUSD in 2022. Nigeria's regulator chose not to wait for its own case and shut this class of tokens out entirely.

The rule works the same way against tokens without an enforceable right of redemption. If a holder cannot be sure of swapping the coin for money, it is no longer a stablecoin in the regulator's eyes.

What does this change for the market?

The country has acted tough for a while. It earlier limited banking access for exchanges and tried to restrain P2P trading for the local currency. Under government pressure Binance shut its naira services in March 2024, and its executive Tigran Gambaryan was held for almost eight months. In August 2026 the revenue agency also introduced tax collection rules for crypto platforms and P2P marketplaces.

The new rules add clarity, since there is now a defined path to a license. For users this means popular USDT and USDC with reserves will most likely pass review, while experiments without backing will fade. Exchanges still have to study the licensing details, and they have half a year.