Recent reports indicate that Nigeria, the West African country, is heading towards launching its promised Central Bank Digital Currency (CBDC). The Central Bank of Nigeria (CBN), in a sensitization circular to commercial banks, revealed the features of the e-Naira – the planned CBDC.
According to reports by a local news outlet, Nairametrics, the document stated that the e-Naira would be “a non-interest bearing” legal tender pegged to the value of the Naira. The e-Naira would have a transaction limit for customers, and a value-based transaction limit.
The plan for its rollout has outlined five levels of participants. These include the central bank itself (monetary authority suite), licensed financial institutions (financial institutions suite), the government (eGovernment suite), merchants, and users (retail consumers suite.
The Central Bank will be handing the first product component that includes issuing, distributing, redeeming, and destroying the currency, as well as handle data storage, and monitor and analyze transactions. Others will have roles to play ranging from custodial and currency management to performing KYC for customers and implementing AML compliance for transactions.
The e-Naira release will also be accompanied by an official digital wallet – the Speed Wallet. The wallet is intended to be a stand-in wallet for users pending when financial institutions and merchants can develop their wallets.
This announcement may be an indicator of what is to come for regulation of the asset class. Earlier this year, the CBN released a communiqué that was thought to be a ban on cryptocurrency trading in the country. It later clarified that it was not an outright ban, but a ban on the banking sector, stopping banks from implementing transactions with cryptocurrency exchanges for Nigerians. Notably, the restrictions have not hampered crypto adoption in the country as traders have mostly resorted to peer-to-peer transactions.
The CBN also announced at the time that it would be looking more closely at regulating the crypto-industry in the country. This is why crypto-proponents may not be too excited about the release of a CBDC in the country. The e-Naira may mean even stricter regulatory policies for other cryptocurrencies in the long term. However, it is still a step towards greater blockchain technology adoption for the country.
Cryptocurrency regulations have been unclear in the country as the government has been giving mixed signals. While the CBN was acting against crypto trading, some members of the government have pointed to efforts to drive blockchain adoption as an integral part of digital innovation in Nigeria.
Meanwhile, Nigeria remains a leader in cryptocurrency trading volume and Bitcoin trading volumes in particular. In June, Nigeria’s volume of P2P transactions for Bitcoin topped $38 million. The transactions were mostly facilitated by online platforms outside the control of Nigerian regulators which are being used to trade Bitcoin in Nigeria. This suggests that despite banning financial institutions from facilitating cryptocurrency transactions in the country, Nigerians did not stop transacting in cryptocurrencies. The new CBDC like many others in different countries might not be much of a threat to Bitcoiners in the country after all.
