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What you need to know about Bitcoin adoption in the Central African Republic

The Central African Republic (CAR) is adopting Bitcoin as its official currency alongside its local currency, the CFA franc, the president announced on April 27.

The move sparked a backlash from the region’s central bank, the Bank of Central African States (BEAC), which manages a common currency with the Central African CFA Franc used by six countries: Cameroon, Central African Republic, Chad, Republic of the Congo, Gabon and the Equator. Guinea.

In response to this move, BEAC issue a statement declared CAR’s adoption of the new cryptocurrency law “null and void” and in violation of regional bloc principles.

“This Act suggests the CAR aims to build a currency that competes with or aims to replace the Central African Central Bank and the CFA Franc,” the statement said.

The IMF also voiced concern about the CAR decision, protesting that the move was made without consulting the regional economic union, the Central African Economic and Monetary Community (CEMAC).

Adoption “poses major legal, transparency, and economic policy challenges,” the IMF said, adding that they were assisting CAR regions and authorities in addressing the problems posed by the new law.

What does adoption mean for the Central African Republic?

The decision meant that Bitcoin had to be accepted as payment in addition to the existing currency.

In a statement to Reuters, Obed Namsio, chief of staff to President Faustin-Archange Touadera, insisted the bill “will improve conditions for Central Africans,” calling it “a firm step towards opening up new opportunities for our country”.

But many are confused by the country’s decision. The Central African Republic is one of the continent’s poorest countries, ranking 188 in the 2021 UN Human Development Index rankings, with a gross national income per capita of just $993. The technological barriers to broad uptake are enormous (see below).

Only one other country – El Salvador – has made Bitcoin legal tender, promising that it will help boost the country’s economy. But despite app launches and inducements to sign up, uptake is very low.

Nevertheless, some Bitcoin enthusiasts say the new law has the potential to make the CAR economy more competitive, transparent and immune to foreign currency wild spins.

“There are other countries that have moved in the same direction to adopt Bitcoin as a legal tender and there are several advantages to using Bitcoin compared to your own country’s currency, and the biggest one is that Bitcoin is inflation-resistant,” said Blake Harris. , who runs a Denver-based law firm with a focus on cryptocurrency law and asset protection.

“When a country is in charge of their own monetary policy, they can print money indefinitely and thus it weakens its value. With Bitcoin there can never be more than 21 million Bitcoins, so this really helps keep the value of your money and gives people more assurance of the money they are saving.”

The move also makes it easier to transfer payments around the world, he added.

“With Bitcoin you can buy and send Bitcoins anywhere in the world, and this gives them a bit more of an edge in the global competitive market to be able to transact business in a currency used around the world.

“Also with Bitcoin, you can’t lie about how much money you have. It’s all in the public ledger.”

Why was Bitcoin adopted when the country has low internet penetration rates and weak access to electricity?

The adoption of digital currencies by countries that are on a shared ledger across global computer networks has confused audiences as the technology relies on reliable, fast internet and widespread access to computers or smartphones.

Internet penetration among 4.8 million CAR people was only 14% in January 2020, according to Datareportal.

Only 14% of the population has access to electricity, especially in the capital Bangui, while access is almost entirely non-existent in rural areas, says Sustainable Energy For All.

That raises the question of whether a large part of the population will be able to send or receive Bitcoin as an alternative currency in the future.

At the same time, critics worry that the adoption of a currency not controlled by any central authority will open the door to illegal monetary transfers. This will affect not only CAR but all countries using the Central African CFA franc and be a boon to money launderers based in the region.

The move may also be linked to Moscow’s growing influence in CAR, where mercenaries from Russia’s private security unit with ties to Vladimir Putin’s Wagner Group have allowed the government to win against rebels and help protect President Faustin. -Archange Touadéra against attempted coup.

The use of cryptocurrencies may be useful to evade international sanctions against the Wagner Group, while a potential hit to the French-backed Central African CFA franc could be a significant development as Paris and Moscow jockey for influence in the region.

How will Bitcoin adoption affect the Central African CFA franc?

The CFA franc, founded by France as a colonial currency in 1945, continues to be used by both the CEMAC countries and the eight independent West African countries that are members of the West African Economic and Monetary Union (UEMOA).

Defenders of the CFA franc, which is pegged to the euro and whose convertibility is guaranteed by the French Ministry of Finance, point to the macroeconomic stability and low inflation it brings to countries that use it. (The West and Central African versions are technically different currencies but have the same value and similar relationship to the French Ministry of Finance.)

However, currency detractors see it as a form of neo-colonial surveillance. France’s role as “guarantor” of the CFA franc had given it immense power over its former colony, whose monetary policy, far from being independent, had to coincide with that of France, and later the European Monetary Union.

In recent years, the existence of the currency has become the object of increasing popular anger as a perception has developed that it benefits France and the local elite while restraining rather than augmenting African economic development. Measures taken by UEMOA countries to relax relations with the French Ministry of Finance has not been followed by CEMAC.

The CAR decision violates the basic provisions of the arrangement that underpins the Central African CAF franc – notably that the CFA franc must be the only legal tender in the region and that the BEAC is the only body that can issue currency for the zone – and could lead to expulsion of the CAR from it.

“This law is a way to get out of the CFA franc through means that undermine the common currency,” said former CAR prime minister and current opposition lawmaker Martin Ziguélé. “It’s not a state priority. This move raises the question: who benefits?”

What does CAR adoption mean for Bitcoin?

Given the small economy of CAR and the resistance the country is facing from its currency zone, the immediate impact on Bitcoin itself is likely to be negligible.

The currency continues to be volatile, with the price of Bitcoin falling from a high of $47,454 in March to $31,414 by the time it was printed.

But if the experiment is successful and more countries explore the legal adoption of Bitcoin, it could add to the credibility of the digital currency, as the use of Bitcoin has now moved far beyond the dedicated merchant and business community.

“Those with the most money don’t like Bitcoin. This is a threat to their strength,” Harris said.

“However due to its decentralized nature, it is very unlikely to stop Bitcoin at this point because you can wipe Bitcoin computers in one country or on one continent and it will continue to persist in another.”

Additional reporting by David Thomas and Charles Dietz



What you need to know about Bitcoin adoption in the Central African Republic

Source link What you need to know about Bitcoin adoption in the Central African Republic

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