Since Wednesday April 27, bitcoin has been the official currency of the Central African Republic alongside the CFA franc and the use of cryptocurrencies has been legalized. The objective is to boost growth and create jobs in a country hit by civil war for 9 years. Corruption is widespread there and the Russian influence is proven. It is the second state to formalize cryptocurrency after El Salvador.
A second state in the world crowns bitcoin as the official currency. The Central African Republic, a country of barely 5 million inhabitants in Central Africa, has adopted cryptocurrency as legal tender alongside the CFA franc, the presidency announced on Wednesday April 27, relayed by Agence France Presse. The country is drawing up a regulatory framework that aims to promote the adoption of cryptocurrencies as a mode of payment by businesses as well as for the payment of tax contributions via platforms recognized and authorized by the government.
The National Assembly passed the law unanimously by the deputies present to “govern cryptocurrency in the Central African Republic” and President Faustin-Archange Touadéra promulgated it, assures the Central African presidency in a press release. This makes the Central African Republic the first country on the African continent to adopt bitcoin as a reference currency, and the second in the world after El Salvador in September 2021.
“Courageous and visionary country”
The International Monetary Fund (IMF) reacted to El Salvador’s announcement by denouncing a dangerous decision “for financial stability, financial integrity and consumer protection”. The presidency of the Central African Republic believes, on the contrary, that “this approach places the Central African Republic on the map of the most courageous and visionary countries. It shares the CFA franc with five other countries of the Economic and Monetary Community of Central Africa (Cemac), which enjoy more favorable economic situations than the Central African Republic.
The new law authorizes and governs all transactions related to cryptocurrencies, without restriction, carried out by natural or legal persons, public or private. The text applies to e-commerce activities, all electronic transactions and tax contributions. The law also provides that “cryptocurrency exchanges are not subject to tax”.
A poor and poorly connected country
To emancipate themselves from the currency resulting from colonialism and seek innovative economic levers, the temptation of digital currency is a solution that governments can reach without the need to create a central bank. This change of currency costs almost nothing, since it is the blockchain miners who secure and defend the system.
However, the technological challenge remains: the Central African Republic is the second least developed country in the world, according to the UN, despite reserves of gold and diamonds. Many residents do not have bank accounts and internet penetration in the landlocked country is around 11%, according to DataReportal, an online data portal.
Years of violent conflict and a political crisis that rocked the country in the run-up to presidential elections in December 2020, had severe repercussions on the economy and damaged relations with international partners, even leading to delays in distribution vital help.
The shadow of Russia
“With systematic corruption and a Russian partner under international sanctions, the context encourages suspicion,” Thierry Vircoulon, a specialist in Central Africa at the French Institute for International Relations (IFRI), told AFP. “ Russia ’s search for ways around international financial sanctions calls for caution.”
At the end of 2020, a majority of the armed groups which then occupied two-thirds of the territory launched an offensive against the power of President Touadéra, who called on Moscow for help. Already present since 2018, Russian paramilitaries came as reinforcements alongside Central African soldiers to repel the rebel offensive.
The next country to cross the rubicund could be Panama. Without necessarily choosing the official currency, Panama is working on authorizing payments in Bitcoin and Ethereum. The situation is different: Panama has no official currency but uses the US Dollar. Guatemala and Honduras are also mentioned in the forecasts of the experts.