Bitcoin’s African outpost raises several red flags

06 May, 2022 - 00:05 0 Views
Bitcoin’s African outpost raises several red flags

eBusiness Weekly

LONDON – Bitcoin’s latest fans are about as far as you can get from Silicon Valley crypto bros. War-torn Central African Republic (CAR) on Wednesday adopted the digital currency as legal tender. It’s even odder than when El Salvador did the same thing last year.

The surprise expressed by the region’s central bank and President Faustin-Archange Touadéra’s military reliance on Russian mercenaries are red flags. Bitcoin’s path to the currency mainstream just became thornier.

El Salvador’s crypto conversion in September generated lots of headlines and much huffing and puffing from the International Monetary Fund. Within months, nearly 4 million people, or two-thirds of the population, had piled into the Central American country’s new Chivo e-wallet system. However, all but a handful stuck to exchanging digital U.S. dollars, rather than bitcoin. Six months on, only 14% of Salvadoran merchants had processed a crypto transaction, according to the El Salvador Chamber of Commerce.

The case for crypto in CAR looks even more tenuous. Most of the former French colony’s 5 million citizens, who enjoy just US$525 of GDP per capita, lack access to broadband or 4G phone reception, a prerequisite for bitcoin-based transactions.

And unlike El Salvador, which has a third of its people working in the United States, there are few overseas Central African migrants wanting to send money home.

Furthermore, residents of Bangui, its riverside capital, already have access to digital currency via mobile money networks run by operators like France’s Orange.

And – unlike many deeply impoverished countries – they also have a stable currency thanks to the six-country CFA franc, which is pegged to the euro, underpinned by the Bank of France and overseen by the regional Bank of Central African States (BEAC) in neighbouring Cameroon.

Swapping that for the wild gyrations of bitcoin sits uneasily with Touadéra’s vision of a new era of crypto-fuelled peace and prosperity.

The BEAC’s surprise at Bangui’s bitcoin gambit raises serious eyebrows. So too does the presence since 2018 of large numbers of Russian mercenaries, who have been accused by the United Nations of atrocities including torture, rape and summary executions.

Paying their employer, Wagner Group, will have been complicated by U.S. and European sanctions imposed after Russia’s invasion of Ukraine.

Bitcoin – as well as CAR’s reserves of gold and diamonds – may be an alternative medium of remuneration. If so, the cryptocurrency will be tarred by association.

– Central African Republic (CAR) said on April 27 that it had adopted bitcoin as legal tender.
The country is following in the footsteps of El Salvador, which made the crypto unit an official currency in 2021.

CAR is one of six nations that uses the euro-pegged Central African CFA franc, a regional currency governed by the Bank of Central African States (BEAC), which is based in neighbouring Cameroon.

A BEAC spokesman said the institution only became aware of CAR’s adoption of bitcoin at the same time as the public.

Two former CAR prime ministers signed a letter describing the unilateral move as a “serious offence”, Reuters reported. – Reuters

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