CAR legalises bitcoin, introduces digital currency

By 'Tofe Ayeni, Nancy-Wangue Moussissa
Posted on Wednesday, 6 July 2022 19:03

Representations of cryptocurrency Bitcoin plunge into water in this illustration taken, May 23, 2022. REUTERS/Dado Ruvic/Illustration

The Central African Republic (CAR) is moving full steam ahead with plans for its own digital currency despite financial experts' widespread concerns about its lack of transparency.

President Faustin-Archange Touadéra announced on 3 July that his government was officially launching a “new digital system powered by blockchain technology.” CAR is developing its own cryptocurrency, the Sango Coin, he said, with plans to create a “crypto island” — a special economic zone in the metaverse — to help transform the country into the “first African crypto-hub” with zero taxation.

“The alternative to cash is cryptocurrency,” Touadéra said. “For us, the formal economy is no longer an option.”

In April, the CAR became the first country in Africa (and only the second in the world, after El Salvador) to adopt bitcoin as legal tender. Tonga announced similar plans earlier this year but has yet to enact legislation.

Dreaming big

The CAR has been under international sanctions for almost a decade as civil war rages on, complicating the country’s access to financial markets. The cryptocurrency move is widely seen as being at least partly aimed at helping circumvent sanctions on CAR ally Russia, but it comes at an especially inauspicious time as the price of bitcoin has been free-falling and many cryptocurrency platforms are facing bankruptcy.

With 57% of the African population unbanked, Touadéra says he would like the Sango Coin become the currency of CAR’s “new generation.” As the Sango Coin is digital, it does not fall under the control of the central bank.

In parallel with its deepening ties with heavily sanctioned Russia, Bangui is looking to counter its financial exclusion from the rest of the world while also reducing ecomic dependence on former colonial power France, which is tied to CAR by its paper currency, the CFA France. Creating a national physical currency would be difficult, however, so cryptocurrencies’ decentralised operation centre remains appealing despite their volatility.

Beyond CAR

Various countries across the continent are considering legalising cryptocurrency, such as Uganda, or creating their own official digital money, such as the eNaira in Nigeria.

A report by blockchain data platform Chainalysis last fall found that Africa’s cryptocurrency market grew by more than 1,200% between 2020 and 2021.

Despite digital currencies’ growing popularity, lack of internet access is hindering their adoption in Africa. CAR is no different; according to the UN, it is the second least-developed country in the world, with only 14.3% of the population having access to electricity, let alone the internet.

Nevertheless, Touadéra believes that the crypto is the key to the future.

“The ambitious strategy to build a successful economy can only rely on new technologies that have taken the world by storm and taken money to another level,” he said, “with Bitcoin as the watchword.”

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