Central African Republic becomes second country in the world to adopt Bitcoin as legal tender following the example of El Salvador
The Central African Republic today became the second country in the world to adopt Bitcoin as legal tender. To date, only El Salvador had taken this unconventional economic step, with a journey that began in June 2021. The news that Central African Republic would accept the currency at the institutional level came after the president’s office released a statement in which it boasted that it was “the first country in Africa to adopt Bitcoin as a reference currency”, while announcing “the implementation of an agenda that will enable strong and inclusive growth for the benefit of development”. The communiqué, riddled with hopeful messages towards the future, ends by calling on the legacy they will leave “to future generations”.
The National Assembly approved the project unanimously and its decision caught economic organizations by surprise, both at state and world level. Within hours of the news being made public, the IMF urged the Central African government to straighten course and abolish “legal tender” of the cryptocurrency, while members of the Bank of Central African States (based in Cameroon) claim that they were never told of President Faustin-Archange Touadéra’s intentions. It almost seems that the aforementioned communiqué was the only thing that makes this decision real, almost more than the vote of the National Assembly or its implementation.
The only legal tender in the Central African Republic had been the Central African CFA franc, a currency historically linked to the French franc and later to the euro (656.80 CFA francs are unequivocally equivalent to one euro every day of the year, regardless of how the economies of the countries governed by these two currencies fluctuate). Pan-Africanist leaders of various stripes have harshly criticized the CFA franc system and one can guess in the communiqué of the presidential office a slight aftertaste of victory over neo-colonialism, by relegating the old currency to make room for the Bitcoin.
Although experts fear disaster, in the same way as there are opinions about the facilities that the use of cryptocurrency would grant to corruption and illegal practices (the country is in 169th position in the Corruption Perception Index and two thirds of its territory is controlled by independent militias), everything seems to indicate that Central African Republic will continue to the end with its proposal.
It faces several challenges if it is to fulfill its new dream. To begin with, statistics show that the Internet has only penetrated 7.1% of the population. Such low levels of digitization are a major impediment to using a digital currency. In addition, the African nation’s economy is largely based on cash, as it is not common for nationals to have bank accounts. A similar case occurred in El Salvador, where almost 70% of the population is outside the banking system and which has also failed to fully entrench the use of cryptocurrency.
On the other hand, a difference between El Salvador and Central African Republic is that the currency of the American country is independent from the rest of the nations and therefore prone to the ups and downs of inflation, while the African currency is shared by five countries and is stable due to its link to the euro. Whether the decision of the Central African leaders is due to a Pan-Africanist ecstasy, a strategy to attract the world’s attention, a raft for corruption to flow or a strategy devised by Russian interference in the country, that escapes us. For the time being, they are the second country in the world to take this step.