Central African Republic President Faustin-Archange Touadéra
The Central African Republic (CAR) has been appearing in discussions and on the news of late and this is not because of an economic breakthrough, new government, or any other reason that the average person would have expected. The African country made the news when it announced that it would be adopting the flagship cryptocurrency Bitcoin as a legal tender on the 27th of April, with the vague explanation that the adoption would open up new opportunities for the country. Bitcoin was eventually adopted as a legal tender in the country, thus becoming the second country in the world and the first in Africa to do so after Central American country El Salvador.
The country’s decision to adopt Bitcoin has raised more than eyebrows, it has caused tongues to wag! Bodies such as the International Monetary Fund (IMF) have shown their contempt for the decision, the same way they did with Nayib Bukele-led El Salvador after the country made Bitcoin a legal tender. The IMF insists that the adoption “raises major legal, transparency, and economic policy challenges,” adding that the decision poses a huge risk for the entire nation.
The decision to adopt Bitcoin as a legal tender came as a surprise for many, especially neighboring countries and African governments, and The Bank of Central African States (BEAC). No one can say they saw the decision coming and even if an African country was expected to adopt Bitcoin, no one would have expected it to be the Central African Republic – one of the poorest in Africa. In its defense, the country says that its decision will secure an independent financial future for the country. Sounds like El Salvador talking right there…
In May, via a tweet he shared, President Faustin-Archange Touadéra announced the Sango cryptocurrency project. The project is named after one of the country’s indigenous languages. According to a government release, the Sango project will bring about “a fantastic opportunity for anyone who believes in crypto investing.” As expected the Sango project which entails an eponymous cryptocurrency has received many reservations. The government which describes Sango Coin as a “national digital currency” says that the cryptocurrency will be worth $21 million by next week. The national digital currency will go on sale on the 21st of July with a minimum investment of $500 to be paid in cryptocurrencies such as Bitcoin (which is a legal tender in the country) and Ethereum, the country’s Sango investment website says.
Bitcoin became a legal tender in the Central African Republic (CAR) after lawmakers by a unanimous vote, and President Faustin Archange Touadéra approved a law legalizing Bitcoin to be used as a legal tender alongside the CFA franc. “This move puts the Central African Republic on the map of the most courageous and visionary countries in the world,” Minister of State and Director of Cabinet of the Presidency, Obed Namsio said after Bitcoin’s adoption. During the recently held launch of Sango Coin, President Faustin-Archange Touadera said that cryptocurrencies are the solution to solving the challenges with regard to reducing the financial inclusion gap. He said this while citing the cost of opening bank accounts. “The alternative to cash is cryptocurrency. For us, a formal economy is no longer an option,” he said. But he and a small group of advocates may be the only ones to believe this…
Bitcoin has quite numerous advantages irrespective of the fact that it can be used to commit crimes such as money laundering, tax evasion, avoidance, terrorism funding, etc. For countries such as El Salvador and the Central African Republic that decide to adopt Bitcoin as a legal tender, the cryptocurrency could help ensure faster and cheaper cross-border payments and remittances, increase financial inclusion, revamp the traditional banking and financial systems, provide more financial security for citizens, create more opportunities and actualize the dream of a cashless society.
Although cryptocurrencies have a handful of advantages for individuals and governments like the Central African Republic, here are some of the reasons why the Central African Republic shouldn’t have adopted Bitcoin as a legal tender and launched its indigenous Sango coin, on the basis that the country isn’t ready…
Poor Internet Penetration
Not only is the Central African Republic one of the poorest African nations (by 2020 GNI per capita, Atlas method, current US dollar, and current United Nations rankings), the country is plagued with poor internet penetration. According to a 2021 report by DataReportal, there were 557.1 thousand internet users in the country as of January 2021. This is a country with a population of 4.87 million people as of January 2021. Also, the report stated that internet penetration in the country stood at 11.4 percent in January 2021, which is far from impressive.
The thing is the internet and access to it is a prerequisite to be able to use digital currencies like Bitcoin and recently launched Sango Coin; hence the digital in “digital currencies.” Although Bitcoin is legal in the country and people are being encouraged to use Sango Coin, how many people can really access it?
Poor Smartphone Usage
The 2021 report by DataReportal also stated that only 140 thousand people were using social media in the country in the country as of January 2021. Between 2020 and 2021, social media users in the country grew by 20 thousand or 17 percent. This is a country with a population of millions. These figures give us an idea of the number of people using smartphones in the country. Besides access to the internet, a device such as a smartphone is also needed to be able to use digital currencies. To use Bitcoin and its newly launched Sango Coin, a digital wallet is required. To access a digital wallet, a smartphone or any other internet-enabled device is mandatory but with its poor numbers, how does the Central African Republic plan to deal with this challenge?
Feasibility Of Adoption
How feasible will the adoption of Bitcoin and Sango Coin be in the Central African Republic after considering the points above? First off, many Central Africans lack an understanding of what digital currencies are and how they work. We’ve hardly heard of any government-run sensitization project on cryptocurrencies. With poor internet penetration and below the average population using smartphones, how feasible is the adoption of Bitcoin and Sango Coin even if they remain legal in the country?
Crypto Market Instability
The latest occurrence in the crypto market is widespread news. Major cryptocurrencies such as Bitcoin and Ethereum have seen their value plummet and uncertainties continue to surround the market. Still, the Central African Republic’s government still has high hopes for Bitcoin and its indigenous crypto Sango Coin. While it doesn’t seem to be a source of worry for the African country, the government should have considered the volatility of cryptocurrencies, as well as other factors, before embarking on its decision.
Money Laundering, Corruption, and Crime
One of the major reasons why governments around the world frown at cryptocurrencies is because they can be used to commit almost untraceable crimes such as money laundering. The government should have made this a factor before embarking on its decision.
Looking away from the negative aspect of things, cryptocurrencies could be just the solution that a country such as the Central African Republic needs. If the country’s plans succeed, it could bring a change to its economy, create new opportunities for the country and the continent as a whole, and help to reduce or eradicate the aversion that other African governments have for Bitcoin and other digital currencies by giving them credibility.