CBN, SEC partner to develop joint regulatory framework for regulating ICOs, Stablecoins
The Central Bank of Nigeria (CBN) is open to creating a regulatory framework for potential implementations of stablecoins, according to a recently released document seen by journalists.
The document titled “Nigeria Payment System Vision 2025” includes provisions for regulating initial coin offerings (ICO) and Stablecoins.
The regulation of initial coin offerings (ICOs) and how they can develop into “a new approach to attract foreign direct investment (FDI) and raise capital” were covered in the report, suggesting that the apex bank is moving towards mainstream adoption of cryptocurrencies.
The CBN also said it will engage relevant stakeholders to review and implement remittance solutions using blockchain technology.
Excerpts of the document provide an insight into the apex bank’s take on stable coins and how they can help facilitate cross-border transactions.
“Stablecoin implementations are likely to be successful payment mechanisms. There is a need to develop a regulatory framework for such implementation that almost certainly will be used in Nigeria.”
The document also states there is a potential for using ICO technology as a new method of financing for capital projects (in the wholesale market), peer-to-peer lending, or crowdfunding (for the retail market), given the function of ICOs as an asset class. However, it cited the lack of regulation as a major impediment.
“Given the lack of regulation around the current generation of ICOs, there is little desire to adopt them.”
The CBN also suggested ICOs could be turned into financial instruments for attracting FDIs and raising capital, especially for the Utility Sectors.
“If implemented properly and supported with the right rules and regulations, ICOs could be turned into Financial Instruments and Investment Options, creating a new way to attract Foreign Direct Investment (FDI) and raise capital.
“An interesting use case could be in the Power (utility) sector where people can crowd-fund a power project initiative by investing money in return for a coin as equity.
“Further, the tokens created as in the case of Power could be used to provide access to power for participants. On one hand, it could be used as an investment tool and on the other hand, it could be used as a passage for access to a product or service.”
The document also stated that Security and Exchange Commission (SEC) would need to provide a regulatory framework since the tokens would be a new asset class.
The SEC released a digital asset regulation last May, which provides guidance for the registration of cryptocurrency assets including ICOs. In the regulation, SEC also defined ICOs as Securities Token Offering – Securities Token Offering (STO) means any offering and sale of digital tokens that are considered securities.
However, the broader recommendations indicate the CBN will work with SEC to jointly develop a regulatory framework for ICO adoption.
“CBN would consider the development of a regulatory framework for potential implementation of ‘Stable Coin Offerings.’ CBN would continue its watching brief on ICOs as well as work with SEC to jointly develop a regulatory framework in the event of adoption of an ICO-based investment solution.”
