Nigeria’s central bank will explore the adoption of blockchain technology to power a central bank digital currency (CBDC), the potential of stablecoin adoption and regulatory considerations of initial coin offerings (ICOs) over the next two years.
These are the key takeaways of a policy document titled Nigeria Payments System Vision 2025, published by the Central Bank of Nigeria (CBN). The 83-page document touches on a variety of implications for its existing payments landscape, with blockchain-based systems coming to the fore.
The document delves into the implications of a blockchain-based CBDC, outlining 11 potential advantages of such an offering. This includes reducing cash cost management, combating counterfeit currency, clear auditability and logistical improvements and payment efficiency.
Nigeria’s Central Bank believes monetary policy can be improved by monitoring and adjustability of a CBDC while the value of a digitized fiat currency can also be better controlled. The Bank also notes that it could better monitor and control tax evasion, money laundering, and other illegal activities through a CBDC.
Lastly, the CBN touts improved financial inclusion and economic development as well as spurring innovation and efficiency by boosting competition between existing financial institutions’ retail payments products. A 3-to-5-year time frame is recognized as an achievable time frame to roll out a CBDC solution in Nigeria.
Stablecoins are also on the radar in Nigeria as fiat-backed cryptocurrency tokens become adopted in different countries around the world. The CBN cites a need to develop a regulatory framework for the implementation of stablecoin offerings in Nigeria.
Nigeria’s Central Bank holds a guarded view of ICOs, highlighting ‘little appetite’ to adopt existing ICOs given their ‘lack of regulation.’ Despite this fact, the CBN identifies the role of ICOs as an asset class and sees potential in adopting ICOs as a novel approach to fundraising for capital projects, peer-to-peer lending or crowdfunding.
Smart contract functionality is another point of interest highlighted in the policy document, with the CBN highlighting the ‘tangible benefits’ of linking settlement to transfer of ownership through smart contracts as well as the transfer of ownership of financial securities or completing commercial trade transactions.
The country has been piloting a…