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Regulators Skeptical about Central African Republic’s Bitcoin Adoption

Regulators Skeptical about Central African Republic’s Bitcoin Adoption

Explainers Cryptocurrencies

12 May 2022

Crypto adoption in Africa has flourished over the last few years. From June 2020 to June 2021, Chainalysis reported a growth of more than 1,200% in Africa’s crypto market. Furthermore, Africa is responsible for the largest volume of retail-sized transfers in the world, with an average of 7% as opposed to the global average of 5.5%. This growth is expected to scale as countries such as Cameroon, the Democratic Republic of Congo, and the Republic of Congo have begun engaging with The Open Network (TON) to explore crypto and blockchain solutions. But perhaps one of the most surprising turn of events is when the Central African Republic (CAR) announced that it will be making Bitcoin (BTC) the legal tender of the country.

Central African Republic Adopts Bitcoin as Legal Tender

On April 27, 2022, the government of the Central African Republic officially made Bitcoin its national currency, placing Bitcoin alongside the CFA franc as legal tender. This move makes the Central African Republic the second country in the world to have adopted Bitcoin as legal tender, after El Salvador.

However, the decision to officialize Bitcoin comes with no precedent and many speculated on the CAR government’s strategy. A simple statement from President Faustin Archange Touadera’s Chief of Staff Obed Namsio read, “The move places the Central African Republic on the map of the world’s boldest and most visionary countries.”

Reason for adopting Bitcoin in CAR unclear

The adoption of Bitcoin as legal currency in the Central African Republic comes as a huge surprise for many, especially since its population is not known for being tech-savvy or for being particularly drawn to crypto. According to a report from the DataReportal website, the country only saw internet adoption rates of 11% last year. Furthermore, only 14% of the population have access to electricity, and less than half of the population have access to a mobile phone connection. Needless to say, this in itself is an obstacle that needs to be resolved before the question of Bitcoin adoption is raised. Many analysts have therefore raised concerns that CAR lacks the resources to accommodate a new and evolving currency such as Bitcoin. If El Salvador is struggling with implementing countrywide Bitcoin adoption, analysts forecast that it will be even harder to do so in CAR.

The Central African Republic, although known for its diamond and gold production, is a country that is struggling with poverty and economic stability. Classified as a repressed economy by the Heritage Foundation’s 2022 Index of Economic Freedom, the Central African Republic is suffering from civil conflict and military coups instigated by rebel groups. Given the circumstances and the vague elaborations of CAF officials, it is unclear why Bitcoin was adopted as legal tender in the first place.

Authority figures concerned with Bitcoin as legal currency in CAR

Some have speculated that this move was intended as a strategy to bypass the CFA franc. Currently, six Central African countries, namely the Central African Republic, Cameroon, Chad, the Republic of Congo, Gabon, and Equatorial Guinea, transact with the CFA franc, a currency backed by the French treasury and pegged to the euro.

Former CAR prime minister Martin Ziguele expressed his concern and commented, “This law is a way of getting out of the CFA franc through a means that guts the common currency.” He added, “If the law isn’t a priority for the country, this move raises the question: who benefits from it?”

In parallel with this, the Central African Republic has been ravaged by a civil war that has been ongoing for several years. The conflict was momentarily appeased when France intervened militarily. However, the situation escalated once again in 2020, with rebel groups seizing control of the capital Bangui. Russia then dispatched paramilitaries to help recover the territory. But while the CAR authorities described the operatives as military advisors, France, the UN, and others regarded them as mercenaries belonging to the Kremlin-backed Wagner group, a mercenary organization in Russia accused of rapes, robberies, and violence.

Needless to say, the justification for adopting Bitcoin in CAR remains unclear for the time being. Some have even pointed out that the adoption goes against a policy that was previously established by the Bank of Central African States. The policy stipulates that all six members of the Central African Monetary Union will use the CFA franc. Given the agreement, “the adoption of an official currency other than the CFA franc is problematic in light of measures put in place to manage monetary issuances and monetary policy,” the Governor of the Bank of Central African States Abbas Mahamat Tolli wrote in a letter.

The central bank’s criticism adds to that of the International Monetary Fund who raised legal and transparency concerns regarding CAR’s Bitcoin adoption.

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Shine Li

Senior Content Manager

Shine is the Senior Content Manager at AAX. Focused on branding and content initiatives at the digital asset exchange, she aims to drive the adoption of cryptocurrencies and blockchain forward with engaging content. When she’s not working, Shine can be found daydreaming about her next travel destination or playing sports.

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