Wrapped CBDC’s ₦15m Boost from cNGN Reserves Falls Short Without Widespread Adoption

Wrapped CBDC, the private entity behind the cNGN stablecoin pegged to the Nigerian naira, reported earning ₦15.34 million ($10,500) in accrued income over a seven-month period, as detailed in its September attestation report released on Monday. While the reserves are currently yielding solid returns, the long-term financial success of Wrapped CBDC depends heavily on the widespread adoption of cNGN by Nigerian users and integration with crypto platforms.

Since March, Wrapped CBDC has progressively adjusted its reserve allocation, favoring yield-generating collective investment schemes (CIS) and short-term government securities. In the March attestation, the issuer held ₦50 million ($34,000) in a money market fund within total reserves of ₦152.5 million ($104,000), with the remainder in bank deposits. The April report reflected a similar reserve composition and total.

By May, a strategic shift was evident: investments in money market funds and comparable assets increased to approximately ₦100.1 million ($68,250), while cash deposits decreased to about ₦51.1 million ($35,000), bringing total reserves to ₦156.1 million ($106,500).

Over subsequent months, Wrapped CBDC expanded its holdings in money market funds and treasury bills from an initial ₦50 million ($34,000) to nearly ₦295 million ($201,000), now constituting 48.5% of its reserve portfolio. Currently, the issuer allocates around ₦152.8 million ($104,000) to a CardinalStone money market fund and ₦142.2 million ($97,000) to two short-term Nigerian treasury bills.

These assets have collectively generated ₦15.34 million ($10,500) in accrued returns, as per official filings. This reallocation strategy transforms idle cash into interest-bearing instruments, enhancing the reserves’ ability to produce operational income while maintaining sufficient liquidity for token redemptions.

Revenue Generation Models for Stablecoin Issuers

It is economically prudent for private stablecoin issuers to hold reserves in interest-yielding assets. While cash deposits offer immediate liquidity, they typically yield minimal or no returns. Conversely, money market funds and short-duration government securities provide regular interest payments and maintain high liquidity. This interest income helps offset operational costs and creates a financial cushion to manage redemption demands during periods of market volatility.

Stablecoin issuers commonly monetize these interest streams alongside transaction fees, listing charges, and other investment returns. For example, Tether, the issuer of the USDT stablecoin, invests a significant portion of its reserves in low-risk, interest-bearing instruments such as U.S. Treasury bills and cash equivalents, generating substantial interest revenue.

Additional income sources include fees for token issuance, redemption processing, account verification, custodial services, and strategic investments in other blockchain ventures.

Wrapped CBDC appears to adopt a similar approach. Its primary revenue streams are interest accrued on reserve assets, fees associated with token issuance, and account verification charges for crypto platforms seeking to list cNGN. Together, these form the cornerstone of the company’s monetization strategy.

Issuing stablecoins is fundamentally a balance-sheet-driven business. The issuer must carefully manage redeemable liabilities represented by tokens in circulation, ensuring liquidity and minimizing credit and market risks associated with reserve assets.

This involves three interconnected responsibilities: secure custody of reserves, transparent third-party attestations or audits, and continuous asset-liability management prioritizing immediate redemption capability. Growth is typically financed through equity and venture capital investments, while operational expenses and product development are funded by reserve yields and fee income.

Who Are the Backers of cNGN?

Throughout its development, cNGN has attracted investments from various partners, though specific funding amounts remain undisclosed.

In September, Adaverse, a Saudi-based venture studio linked to the Cardano blockchain ecosystem, reportedly made a substantial investment in Wrapped CBDC. Additionally, the issuer has garnered support from the Base ecosystem and other undisclosed investors.

The May Reserve Shortfall Incident

Since its February launch, Wrapped CBDC has consistently published monthly attestation reports confirming that its reserves matched or exceeded the circulating supply of cNGN tokens. For instance, in March, reserves stood at ₦152.5 million ($104,000) against 152.4 million tokens, with April showing similar figures.

May was the only month that challenged the peg. At that time, 156,056,988 cNGN tokens were in circulation, while principal reserves totaled ₦151.2 million ($103,000), comprising ₦51.2 million in bank deposits, ₦50 million ($34,000) in a money market fund, and ₦50.1 million ($34,000) in other short-term instruments. The shortfall was offset by accrued interest income, enabling the issuer to maintain the peg.

This episode underscores a vital principle: a stablecoin’s peg must be supported by its principal reserves, with interest and investment returns considered surplus. These surpluses create liquidity buffers that safeguard token convertibility and instill confidence among retail holders that redemptions will be honored at face value.

In all other months from March through September, cNGN’s reserves equaled or surpassed the circulating tokens across all six blockchains where it is traded.

Wrapped CBDC’s Commitment to Peg Maintenance

Wrapped CBDC’s fundamental responsibility is to ensure full backing of its stablecoin and maintain transparent reserve reporting. Independent monthly attestations have verified that reserves-held in bank deposits, money market funds, and treasury bills-adequately cover all outstanding cNGN tokens.

The issuer’s role is limited to stablecoin issuance and reserve management. Third-party platforms, such as Xend Finance, a Nigerian crypto investment service, have begun building products around cNGN. For example, in May, Xend Finance launched a cNGN money market fund allowing users to earn returns on their cNGN holdings. Wrapped CBDC has clarified that it is not involved in these external investment products, focusing solely on issuing cNGN and maintaining reserve transparency.

Stagnation in cNGN Adoption

Recent months have seen a slowdown in cNGN’s adoption. According to issuer filings, tokens in circulation rose from 298.6 million in June to 603.85 million in July, but growth decelerated thereafter. The latest data from September indicates circulation at approximately 603.05 million, a slight decrease from July’s peak, signaling a plateau in rapid expansion.

For cNGN to capture the Nigerian retail market effectively, maintaining the peg is now the minimum expectation. The stablecoin must demonstrate tangible utility beyond simply being a “stablecoin” to attract and retain users.