The position of the Central Bank of Nigeria on cryptocurrency has been unwavering since its February 5th, 2021 circular that prohibited financial institutions from facilitating payments involving cryptocurrencies.
Despite the seemingly unsuccessful launch of its Central Bank Digital Currency (CBDC) – the eNaira, there has been no change in this stance, even with the NITDA embracing blockchain technology. However, could things be taking a turn for the better?
The founder and COO of Convexity Adedeji Owonibi, speaking at the Digital Assets Summit hosted by SiBAN in Nigeria’s capital city, Abuja, said that the CBN wants to see a Naira-based stablecoin launched in the country.
A stablecoin is a specific type of cryptocurrency that is designed to maintain a stable value. Its value is often tied to a particular asset class, depending on its design.
There are four main types of stablecoins: fiat-collateralized (backed by traditional currency), crypto-collateralized (backed by other cryptocurrencies), algorithmic (controlled by smart contracts), and commodity-collateralized (backed by physical assets like gold).
Some of the top stablecoins include USDT, USDC, DAI, TrueUSD, USDD, and more. As of September 7, 2023, USDT holds the largest market capitalization, exceeding $80 billion.
Speaking about the project, and why the CBN is interested, Adedeji said that presently, Nigerians are increasingly turning to stablecoins linked to the US dollar for financial transactions, especially USDT.
This is due to its convenience in facilitating money transfers between African nations, such as from Nigeria to Ghana.
He further disclosed that the success of these foreign stablecoins has captured the Central Bank of Nigeria’s attention. He noted that the central bank was initially opposed to cryptocurrencies in 2021 when it instructed all commercial banks to cease crypto-related transactions.
However, he noted that in partnership with Convexity, the Central Bank is exploring a stablecoins project that will serve the Nigerian crypto market, which is among the largest in the world regarding users.
Security, collaboration, and funding
Adedeji also added that while there is a huge interest in building a stablecoin project as well as supporting other blockchain-based products for Nigerians, there is a barrier to understanding the technology on the side of regulators.
He stressed the importance of comprehending the technology before developing secure products for user engagement.
He also mentioned that regulators and experts from the CBN, NCC, and other government organizations are actively addressing this matter.
The blockchain forensic expert also said that as the industry progresses, security remains a paramount concern. Building innovative solutions with robust security measures is essential.
Yet, adequate funding is required to achieve this level of security. Startups, in particular, face budget constraints when addressing these challenges.
To bridge this gap, he pointed out that Convexity is making efforts to provide much-needed financial support for startups.
He also urged the government to find innovative ways to support these young innovators, who play a crucial role in shaping the nation’s technological future.
