Central African Republic’s Bitcoin Buzz Spells “Dead On Arrival”
A little over a fortnight ago, the Central African Republic dominated the global news space with its unlikely move to adopt Bitcoin as a national means of payment in addition to its fiat currency. At the time, the development spurred loaded conversations. Now, however, CAR’s newly found crypto friendliness seems to have left the landlocked country in straits that get direr by the day.
After El Salvador in North America, Central African Republic effectively became the second country in the world to pursue such a path and the first in Africa to welcome all sorts of digital currencies with open arms. More so, CAR was said to be setting a pace for its African neighbours to follow, as most countries in the continent have either outrightly banned or indirectly crippled crypto transactions.
The rather controversial move, with which the country said it wanted to tackle currency and exchange rate drawbacks, was met with mixed reactions. While economists like Yann Daworo said it would turn into a win for businesses struggling with cash reliance, the regional comity of banks in Central Africa rebuked CAR’s decision.
In a letter written to the country’s Finance Minister, Hervé Ndoba, the governor of the Bank of Central African States, Abbas Mahamat Tolli, addressed the development as a harbinger of significant negative impact. The Bank [also known as Banque des États de l’Afrique Centrale (BEAC)] pointed to the possibility of crypto transactions dealing a hefty blow to Central Africa’s monetary union.
“This law suggests that its main objective is to establish a Central African currency beyond the control of the BEAC that could compete with or displace the legal currency in force in the CEMAC and jeopardize monetary stability,” the statement read.
The Bank of Central African States is the seat of management for the CFA Franc, the legal tender used in the region’s six nations; Cameroon, Central African Republic, Chad, Republic of Congo, Gabon and Equatorial Guinea. In a similar way, Central African Banking Commission, which regulates the banking industry in the Central African Economic and Monetary Community (CEMAC), emphasized on a regional crypto ban still being in place.
On the cross-border front, the International Monetary Fund (IMF) equally expressed some misgivings. For one, the IMF indicated that CAR bypassed prerequisite consultations from Central Africa’s [financial] bloc. When El Salvador adopted Bitcoin, the IMF strongly urged the country to scale back those plans as they would culminate in numerous contingent liabilities.
To cap its upbraid, the BEAC urged Central African Republic to nullify its position on cryptocurrency use, especially as an official currency. The regional Bank asked the country to rather focus primarily on the implementation of CEMAC’s monetary policies in order to reduce poverty.
With just 4.83 million people and a GDP of USD 2.3 B, Central African Republic is one of the poorest countries in Africa, more so in the world. The country ranked second in the 2018 Human Development Index, with about 79 percent of the population living below the poverty line. Landlocked in the heart of Africa, it has one of the world’s most fragile economies and is yet to gainfully exploit its abundant natural resources.
While there is a need for cryptocurrencies across Africa, the above-mentioned economic realities in CAR make the case somewhat lopsided. Technically, the country’s infrastructure disposition does not quite support the move. For example, Internet penetration is at around 14 percent, which means only about 655,000 people use the web. What’s more, apart from the scarcity of electricity, mobile data is costly; USD 9 for 1GB, which most citizens are unable to afford.
Central Africa Republic is not economically buoyant [enough] to afford the demands of having Bitcoin as a legal tender. El Salvador, which is a far more developed country, is still struggling to find balance after creating a BTC reserve, on which it has so far spent USD 103 M.
Image Courtesy: Bitcoin news
