The Central African Republic (CAR) has made history by becoming the first-ever African nation to adopt cryptocurrency Bitcoin (BTC) as a legal tender – and only the second nation ever to do so.
The republic follows in the footsteps of El Salvador, which formally accepted the coin as an official money in 2021. The Central American state has suffered several issues since, however, including technical problems and cases of identity theft.
Despite excitement about the coin’s launch in the CAR, many observers have pointed out that the unstable framework within one of the world’s poorest countries might make it easier for criminals to use BTC for illicit activities.
The growing mainstream use of Bitcoin
The CAR government has faced criticism for adopting the cryptocurrency, but it could easily point to the growing mainstream use of Bitcoin across the western world in its defence.
BTC trading has come a long way in the last decade: users can now choose from lists of crypto exchanges to use in much the same way as they might select from a list of best lottery sites or flight providers.
The rise in mainstream use went hand-in-hand with a meteoric price rise which saw the value of the coin rocket from just over $5,000 before the pandemic to $60,000 at the end of 2021, although the price has since stabilized at around the $40,000 mark.
It was the height of its value when El Salvador became the first country to make BTC an official currency. The move was immediately criticized by the International Monetary Fund (IMF), however, who said it contributed to financial instability in an already volatile economy. There are also fears that El Salvador has attracted more illicit trading within its borders given crypto’s confidential, decentralized nature.
The mix of mainstream recognition and high-level criticism makes Bitcoin a tempting yet risky financial option for countries like the Central African Republic, who are looking for ways to bolster their own struggling economy.
A ‘unanimous vote’
CAR is something of a paradox. Despite having reserves of valuable minerals like diamonds, gold, and uranium, it’s one of the world’s poorest nations, ranked 154th in the world according to 2021 data from Credit Suisse. Its economy is in tatters, torn apart by a civil war that’s almost a decade old.
It’s hardly surprising, then, that its leaders are desperate for any kind of financial aid. The move to adopt Bitcoin received a unanimous vote of support from the country’s lawmakers, and the country’s presidency said it made the republic one of the world’s ‘boldest and most visionary countries’.
Yet, despite such positivity, the practical uses of BTC within CAR are shrouded in doubt. Just 4% of the population has internet access, according to World Data. This will probably make it the preserve of the rich elite, who have smartphones and will be able to fund transactions with something other than the near-worthless local CFA currency.
There are also theories that adopting Bitcoin is a way of undermining the CFA by Russia-affiliated agents who are vying for control in the area ahead of former colonizer France.
Everyday impact
The effect of BTC on the average CAR citizen depends on several factors. For those who have smartphones, their day-to-day dealings will become much easier: it will become easier to buy certain products and convert BTC to other currencies. The sight of people carrying around suitcases of CFA francs for purchases may become less common.
However, others have pointed to more pressing concerns. Access to drinking water, education and security is still limited, and taking on BTC detracts from these basic needs. It may even widen the gap between rich and poor, as normal people struggle to make ends meet while BTC owners get access to a new world of privileges.
Also, tax on BTC holdings is hardly likely to go toward improving infrastructure. The country is carved into personal fiefdoms, governed by armed warlords who set up checkpoints to collect illegal taxes from locals. The fear is that any gains from adopting cryptocurrency will simply go into their back pockets.
Could BTC spread to other African nations?
The CAR is likely to be the ‘guinea pig’ in Africa: an experiment whose results will determine whether the other African countries decide to press ahead with their own crypto plans.
The continent has been the scene of rapid technological advances, with the help of Chinese and Russian investment. Countries like Kenya and Nigeria have been quick to embrace new ideas as they seek to create technological hubs after years of economic struggle.
The CAR move to adopt Bitcoin, though, is probably the riskiest project yet, and one that might even set back the tech revolution sweeping the continent.
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