Next Wave: The perimeter and the drain

First published 18 Jan, 2026

To understand the current state of digital tokens in Africa, one has to appreciate the sheer cognitive dissonance of being a central banker in 2026. On one hand, you have spent decades building a fortress around your national currency that includes strict capital controls, high interest rates and a lot of paperwork. On the other hand, anyone with a cheap smartphone and an internet connection can now bypass that entire fortress by holding a digital representation of a US Treasury bill.

The regulatory Great Wall

In early 2026, the regulatory landscape across the continent has shifted from a state of denial to one of frantic perimeter-building. If you were looking for a unifying theme, it is formalisation through exhaustion.

Take Nigeria, for example. Just this week, the Securities and Exchange Commission (SEC) raised the minimum capital requirement for digital asset exchanges to ₦2 billion ($1.4 million). This is a classic move, which implies that if you can’t easily ban the activity, you raise the cover charge until only the most “institutional” (read: compliant and deep-pocketed) players remain.

In Kenya, the Virtual Asset Service Providers (VASP) Act of 2025 is now the law of the land. It’s a fascinating piece of engineering because it splits the baby; the Central Bank (CBK) oversees the payment functions, while the Capital Markets Authority (CMA) handles the trading and investment side.

Next Wave continues after this ad.

The narrow banking mirage

The question of whether these tokens are narrow banks is where things get philosophically messy.

In a traditional sense, a narrow bank is a financial institution that doesn’t lend. It takes your $1, puts it very safe short-term bond and gives you a receipt. It doesn’t do maturity transformation; it doesn’t take your demand deposit and use it to fund a project over a long period.

Most global stablecoins, the ones people actually use, like USDT or USDC, are, in theory, narrow banks. They are 1:1 backed by liquid assets. But for an African regulator, this is a narrow bank that is effectively on the wrong team.

When a resident in a high-inflation environment swaps their local deposits for a digital dollar, they are performing a “bank run” in slow motion.

1. The user gets a narrow-bank product that preserves value.

2. The local bank loses a deposit that it would have used to lend to a local business.

3. The US Treasury gets a new lender (via the token issuer buying US T-bills).

This is why we are seeing a push for local-currency tokens. South Africa’s Reserve Bank (SARB) and Nigeria’s SEC are increasingly interested in tokens backed by local assets. The logic is that If you want the efficiency of a digital ledger, it is fine, but you have to keep the backing assets inside local borders.

The great irony of the current regulatory wave is that it aims to make digital tokens safe by making them look exactly like the banking system people were trying to avoid.

By mandating bank-grade KYC, 1:1 local reserve backing, and massive capital buffers, regulators are turning these tokens into Digital Stored Value Facilities.

The 2026 outlook

Africa is currently in the implementation phase, where the theory of the 2025 laws meets the reality of the 2026 markets. The narrow banking dream is technically being realised, but under a heavy cloak of state supervision.

The result is a divided market. There is a licenced perimeter, where large, compliant narrow banks handle corporate trade and high-end remittances, and the shadow perimeter where P2P (peer-to-peer) markets that continue to use global, unregulated tokens because, for a small trader, the risk of a “non-narrow” global token is still lower than the risk of a local currency losing a large portion of its value in a month.

Kenn Abuya

Senior Reporter,

Thank you for reading this far. Feel free to email kenn[at]bigcabal.com, with your thoughts about this edition of NextWave. Or just click reply to share your thoughts and feedback.