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Reasons Behind The Poor Central African Republic Adopting Bitcoin


07/06/2022


Reasons Behind The Poor Central African Republic Adopting Bitcoin
Many people were surprised by the Central African Republic's decision to make Bitcoin legal tender, but the government claims that it will ensure the country's financial independence, according to a report by the BBC. 
 
The president appeared to be mimicking Elon Musk's mysterious cryptocurrency tweets.
 
CAR President Faustin-Archange Touadéra penned "Vires in Numeris" - a Latin motto meaning "power in numbers" that has been associated with Bitcoin - under the teasing header "More to follow." Then came his country's motto.
 
This was made public a month after the Central African Republic became only the second country, after El Salvador, to recognise Bitcoin as legal cash.
 
The mineral-rich country is one of the poorest in the world, exacerbated by a nearly decade-long civil war that has wrecked much of the country. The government has enlisted the support of the Russian mercenary Wagner group in their struggle against the insurgents.
 
Many people were perplexed by the CAR's Bitcoin announcement, and some speculated that it had more to do with a political movement away from France and toward Russia.
 
There hasn't been a significant surge in the number of companies accepting Bitcoin as payment in the capital, Bangui.
 
According to a 2020 forecast, nine out of ten Central Africans do not have internet connectivity, which is required to use Bitcoin.
 
This, combined with a spotty and unpredictable electrical supply, prompted some to doubt if the Central African Republic was the proper site to test the theory that cryptocurrencies will eventually replace traditional forms of money.
 
The initial decision, announced on April 27, came with no explanation other than that it would create "new prospects for our country."
 
President Touadéra's reference to "more to come" in his May tweet was the introduction of a project called Sango, named after one of the country's official languages.
 
According to a government press release, this "visionary" initiative would generate "a tremendous opportunity for everybody who believes in crypto investing."
 
However, the website that the press release invited visitors to visit to learn more is, to put it mildly, opaque. The visitor is asked to sign up for a "secret code" in order to be included to an investor waiting list.
 
The code grants access to a fancy slide presentation in which the CAR states its desire to construct the "first legal Crypto Hub recognised by a country's government, welcoming firms and attracting global crypto-enthusiasts."
 
Sango is a "Crypto Island... the first metaverse island underpinned by reality."
 
According to Stone Atwine, a crypto-specialist who handles digital financial services company Eversend, the individuals behind the briefing used a lot of "big terms," but "the text was not very clear on exactly what they intend to do."
 
Among the jargon appears to be a plan to let consumers to invest in mining and other sectors using Bitcoin, as well as a promise of no income or company tax.
 
Atwine sees promise in this since "a lot of bitcoin aficionados are searching for amazing places to build where things are legal."
 
The Central African Republic has huge quantities of diamonds, gold, and other minerals, and Bitcoin is considered as an easier way to lure investors to the country.
 
"Impenetrable bureaucracy keeps us stuck in systems that don't give us the ability to perform. The solution was to rethink our economic philosophy," President Touadéra said in reference to the Sango project.
 
The idea cannot be criticised for its ambition, but more marketing - and infrastructure - are certainly required when it comes to bitcoin and regular Central Africans.
 
"I don't understand what cryptocurrency is," Edith Yambogaze, who sells cassava in Bangui, told the BBC.
 
"I have a smartphone, but I do not have good enough internet to be able to use cryptocurrency. Also, I do not trust cryptocurrency because there are people who do scams on the internet."
 
Some in El Salvador, where President Nayib Bukele supports Bitcoin with missionary zeal, appear to share this scepticism.
 
"El Salvador has had problems with the take-up of the Chivo Wallet," said Ganesh Viswanath-Natraj, an academic at Warwick University specialising in cryptocurrencies.
 
The Chivo Wallet is a government-developed programme for making Bitcoin transactions easier, however according to recent data, while there were a number of downloads when it was first released last year, there have been almost none in 2022.
 
Some respondents told researchers they didn't believe Bitcoin.
 
However, supporters of CAR's cryptocurrency acceptance are urging consumers to be patient.
 
MP Jean Galvanis Ngassiyombo, a member of the National Assembly's economic, planning, and finance commission, recognised that the country's technology infrastructure was lacking.
 
He did, however, tell the BBC that a fibre optic network would be installed by the end of next year, bringing internet access to everyone.
 
The Central African Republic has agreed to share its fibre optic network with neighbouring Cameroon beginning in 2023.
 
"What the [Bitcoin] law did is anticipate that technology so, in fact, we can be ready when that technology is available to us," Ngassiyombo said.
 
He is a cryptocurrency trader himself, and he told the BBC that he receives regular price swings on his phone. "I made money today," he joked, demonstrating how the software works.
 
It is believed that in a country where few people have bank accounts, the adoption of Bitcoin will encourage savings while also providing a secure way to keep and move money.
 
Many people, though, are sceptical.
 
Dr. Viswanath-Natraj contends that, while there are benefits, investor worries about the country's financial soundness may drive up interest rates, and Bitcoin price volatility may harm savings.
 
The Bank of Central African States (BEAC), based in Cameroon, manages the CAR's currency, the CFA franc, which is backed by France and shared by five other countries in the region. When the law was passed, it was not pleased.
 
In a critical letter issued to CAR Finance Minister Hervé Ndoba in April by the bank's governor, Abbas Mahamat Tolli, the Bitcoin law suggested that the country wanted to establish a currency that might compete with or replace the CFA.
 
He asked CAR to repeal the bill, claiming that it would jeopardise regional financial stability.
 
According to the financial news agency Bloomberg, the International Monetary Fund was similarly negative, stating that it created "serious legal, transparency, and economic policy concerns."
 
Bitcoin advocates may not be astonished by the approach of existing economic institutions, which is heralded as a disruptive force that improves the lives of regular people.
 
However, the criticism, and where it is coming from, suggests that the CAR's move may have political as well as economic motivations.
 
While France's participation in the CFA and its peg to the euro maintain its stability, some regard it as a sort of neocolonial rule.
 
They believe that it stifles economic independence while allowing France, the former colonial power, to retain influence.
 
According to the publication Jeune Afrique, several government ministers are planning to break away from France.
 
Despite the BEAC's misgivings, expert Nathan Hayes of the Economist Intelligence Unit told the BBC that the CAR would be unlikely to give up the CFA "since this would cause considerable economic disruption."
 
"It's a populist announcement from the government, rather than a serious shift in monetary policy," he said.
 
It could also indicate a shift toward Russia.
 
Following the election of President Touadéra in 2016, the country began to alter its strategic alignment away from France.
 
As part of this, Russian Wagner Group mercenaries have been used to battle rebel forces.
 
It has been speculated that they are compensated through the granting of mining contracts, but Hayes believes that Bitcoin "would be a method to avoid any constraints on payments if they decided to shift away from this in the future."
 
But, according to Ngassiyombo, the shift to cryptocurrencies has nothing to do with Russia.
 
"The way we conduct our business… depends on what the president of this country is trying to build for its own people."
 
And, if the glitzy Sango presentation is to be believed, he wishes to create "an infinite digital future."
 
(Source:www.bbc.com)