CAR backs down from implementing cryptocurrency law in exchange for BEAC engagement

By Omer Mbadi
Posted on Wednesday, 27 July 2022 12:29

© JAKUB PORZYCKI/NurPhoto via AFP

Bangui agreed not to implement its cryptocurrency law in exchange for BEAC regulating crypto assets. This common ground was reached in Cameroon’s economic capital Douala on 20 and 21 July.

While the worst was expected, the CAR came out of it relatively well.

“There was above all a desire not to humiliate Bangui. On the contrary, a compromise was found,” a participant told us at the end of the extraordinary sessions between the board of directors of the Bank of Central African States (BEAC) and the ministerial committee of the Central African Monetary Union (Umac) devoted to adopting the law governing cryptocurrency.

Hervé Ndoba – the Central African finance and budget minister, who chaired the meeting on 20 and 21 July – was pushed by his peers, notably Chad and especially the Republic of Congo. “The challenge for Brazzaville is to regain the post of governor of the central bank, in accordance with the principle of rotation,” says a senior community official.

No implementing decree

This pressure was accentuated by the fact that the money managers from the member countries of the Economic and Monetary Community of Central Africa (CEMAC) – which includes the Republic of Congo, Gabon, Central Africa, Equatorial Guinea, Chad and Cameroon – received the communiqué from Obed Namsio, President Faustin-Archange Touadéra’s chief of staff, announcing that the first “sango coins” would be purchased by 25 July, on their phones while they were discussing the subject.

“Bangui has undertaken not to publish the decree implementing the 22 April law. This is equivalent to freezing its implementation. In return, it will have to wait until the BEAC develops a regional regulation on crypto assets to comply with it,” says our interviewee.

The compromise reached in Douala on 21 July is in line with the position of the IMF, whose delegation had completed a mission to Bangui a week earlier. In return for, among other things, a three-month extension of its reference programme, the Bretton Woods institution invited the country to adapt certain provisions of its legislation to the community legal architecture, notably the UMAC convention.

This orientation stems from the working group’s note implemented in April by Abbas Mahamat Tolli, governor of the regional central bank. The document, which we were able to consult, also served as a basis for discussion for the ministers.

Internal note

Bangui adopted a law in April that recognises Bitcoin as a reference currency and obliges any economic agent to accept cryptocurrencies as a means of payment for the purchase and sale of goods or services. As such, the working group’s experts saw this law as tantamount to removing the CFA franc’s exclusive prerogative as a monetary account unit. The central bank also feels that these provisions take away “the exclusive privilege of issuing money with legal tender status and the power of discharge” in the zone, the note says.

Moreover, the experts did not like Article 11 of the law, which enshrines the automatic convertibility of cryptocurrencies into the CFA franc, nor Article 23, which states that the state guarantees this convertibility through the central bank by creating a trust. The note’s authors believed that such provisions would lead to the establishment of “monetary dualism”, as there is now a currency in competition with the CFA franc, perhaps one that is even supplanting it, and which can’t be controlled by the central bank.

The working group also felt that providing a market–determined exchange rate between cryptocurrencies and the CFA franc contravenes the existing fixed exchange rate regime in favour of a flexible one. There is a risk that this will lead to the erosion of foreign exchange reserves, as transactions are beyond the regional financial system’s control.

In search of budgetary support from donors, Bangui has therefore folded in Douala without breaking away. The 25 July deadline announced by Touadéra’s entourage for putting the first “sango coins” up for sale was the first test of this new agreement.

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