- The Central African Republic made Bitcoin legal tender this month, becoming the second country to make the move after El Salvador, but their situations couldn’t be any more different.
- Problems are already arising, with the central bank for the region saying that it wasn’t informed of the move as the IMF sounds a warning against the move.
The Central African Republic (CAR) made headlines a week ago when it emerged that it had become just the second country globally and the first in Africa to make Bitcoin legal tender. BTC fans praised the move, some questioned while crypto skeptics predicted it would inevitably fail. As it turns out, the move wasn’t well thought out and already, there are gaping holes that could prove to be big hurdles for BTC adoption in the country even before it takes off.
As CNF reported, CAR’s Ministry of Digital Economy had partnered with the Ministry of Finance to work on and eventually submit the draft law. Reports revealed that the National Assembly had passed the bill and BTC payments would be legal in the coming weeks.
Already, there were several gaping holes. But one that we didn’t know of at the time was that the CAR had been so eager that it forgot to inform the region’s central bank of its move.
Bloomberg reports that CAR didn’t share its BTC move beforehand with the Bank of Central African States. This bank is in charge of the Central African CFA Franc, the official currency used by these states, which other than CAR include Cameroon, Gabon, Equatorial Guinea, Republic of Congo, and Chad.
The bank has yet to make any stand on BTC use as legal tender, although it’s reasonable to expect that it will not be on board, especially given that it wasn’t involved from the go.
And while it’s only speculative whether the central bank will be against the move, one entity has already made it clear that it’s against the move. The International Monetary Fund (IMF) pointed out that it’s concerned over the move, echoing similar concerns it expressed at El Salvador, the first country to ever take up BTC as legal tender.
The head of the IMF’s African Department, Abebe Aemro Selassie told one outlet that for any country to even think of BTC as legal tender, it needs to have a robust payment system with financial transparency and governance framework in place, which the IMF says CAR doesn’t.
The IMF head further urged national governments not to look at Bitcoin as a silver bullet that will solve all the challenges they face.
CAR is unfazed, but the hurdles may be too big to overcome
Despite the IMF warning, and the central bank bombshell, the CAR is unfazed and the government is fully backing the move.
CAR President Faustin Archange Touadera’s chief of staff, Obed Namsio recently described the move as one that “places the Central African Republic on the map of the world’s boldest and most visionary countries.” He added:
Our nation must be able to pursue its destiny and join the ranks of those who not only fully understand the importance of Blockchain technology, but are eager to legislate it.
However, the hurdles may be too big to overcome. For one, the country is very poor, one of the poorest in the world. It also suffers from political instability, with the Fund for Peace ranking it as the sixth most fragile state in the world. But all these pale in comparison to the challenge that’s a lack of smartphones and very low Internet penetration. According to the World Bank, only 10 percent of CAR residents have Internet access.
How the CAR expects to have the citizens using Bitcoin for payments when they don’t have an Internet connection is a puzzle, but it already has many concluding that the punt on BTC will be a failure.
Anicet-Georges Dologuélé, the country’s former Prime Minister who is now its opposition leader told Bloomberg:
It will be difficult to implement as CAR doesn’t have the capacity or the knowledge to enforce such a law. We lack connectivity, expertise, even power is a problem.
Nathan Hayes, an analyst at the Economist Intelligence Unit is also skeptical that the move will pan out for the country, which despite being vastly rich in natural resources remains quite under-developed. Hayes remarked:
Given the enormous barriers to adoption and risks associated with use, and seemingly limited upsides, we do not expect widespread adoption of cryptocurrencies in the country.
Nevellan Moodley looks at it from a different perspective. He says that for CAR, the fact that it’s poor means there won’t be much to lose even if the move backfires. The technology head at BDO Financial Services claimed:
If they want to use it for the average citizen on the ground, with the low Internet penetration that’s probably not going to happen. But if you look at the country and where they are, they have nothing really to lose. If they can get this going, this could be a step in the right direction.