Central African Republic: currency of the people?
The Central African Republic, one of the poorest countries, is betting on Bitcoin and creating its own digital coin. There are massive political interests behind it.
It wasn’t an April Fool’s joke – the message from the President of the Central African Republic came 27 days too late. In a statement riddled with misspellings, Faustin-Archange Touadéra announced the adoption of Bitcoin as his country’s official currency at the end of April. In this way, “the fate of the Central African population will be revolutionized,” Touadéra justified his internationally sensational decision: “Our country is the bravest and most far-sighted in the world.”
In fact, with El Salvador, only one other country in the world has so far introduced Bitcoin as an official means of payment: At least in Africa, the initiative of the former mathematics professor with a double doctorate is unique.
Two months later, the President surprised those who did not want to believe Touadéra’s original statement with another coup. The Central African Republic (ZAR) will also launch its own cryptocurrency, the Sango Coin, the 65-year-old announced. Finally, “Africa’s First Crypto Hub,” a tax-free crypto paradise, was built on an island in the mighty Ubangi River.
What Touadéra failed to mention: CAR is listed by the United Nations as the second poorest country in the world. The almost five million inhabitants do not even have an average annual income of 500 euros. Less than ten percent of the population have access to the Internet – the prerequisite for dealing with digital currency. Against this background, Touadéra’s initiative had to sound like an announcement by the Principality of Liechtenstein that it would acquire a navy.
Digital currency: means of payment to reward mercenaries
It is already disputed whether Touadéra’s ministerial team is actually a government. It controls only a fraction of the country from the capital, Bangui. The mathematics professor tries to protect himself from the threat with Russian mercenaries: At present there are said to be around two thousand fighters from the notorious “Wagner Troops” in the troubled state.
Probably one of the reasons for the Bitcoin idea: the Russian mercenaries can be paid with the secret currency without there being a conflict with the sanctions regime imposed on Russia by the West.
In contrast to banks and their Swift system, Bitcoins cannot be controlled: even the authorities of the US superpower are unable to prevent or prosecute with cryptocurrencies. The Russian companies affiliated with the Wagner group and involved in the exploitation of the Central African gold and diamond mines can also use the digital means of payment to repatriate their profits: two birds with one blow and two to zero for Bitcoin.
Digital Currency: Farewell to the Central African Franc?
Another reason given is Touadéra’s antipathy towards the former colonial power France. To this day, Paris controls, at least indirectly, the country’s sole currency, the Central African Franc (CFA). Its exchange rate is tied to the euro, and half of their deposits and the central banks of the six countries participating in the CFA are deposited in Paris. The fact that Touadéra allows himself to be protected by Russians is seen as an affront to France: Paris and Moscow are currently involved in multiple competition for political and economic influence in several countries. The introduction of bitcoins would be the beginning of the farewell to the CFA, says crypto expert Chris Maurice: “Bangui is giving the French economic system the middle finger.” Three to zero.
HUGE POVERTY
The Central African Republic (ZAR) is a severely underdeveloped and fragile country in Central Africa. In 2020, per capita gross domestic product was just $494, according to the International Monetary Fund. This makes ZAR one of the poorest countries in the world. With an average of 52.8 years, the approximately 4.8 million people have a very low life expectancy.
main export goods are in addition to wood pearls, precious stones and precious metals. Much of the gold and diamonds are smuggled out of the country. Rebel troops and militias use the illegal income to finance their arms purchases.
The government will raise $1 billion by issuing the first national digital currency, Sango. The Sango is scheduled to launch on July 25th. With the digital coin, the country is creating the conditions for a blockchain-based economy, according to a government strategy paper. to
Of course, the government in Bangui officially justifies its decision differently. Children of the country living abroad could transfer their remissions to those at home much faster and more easily, it is said: With electronic Bitcoin transactions, banks and their fees. Optimists see digital payments as a unique opportunity for Africa, where more than half the population is unbanked. Finding a bank branch, especially in regional regions, is like finding an oasis in the Sahara. A limping comparison in the eyes of many people, who regard the banks not as donors of an elixir of life, but as important ticks that eat fat in the large bloodstream of a society.
Between July 2020 and June 2021, Africans transferred more than $100 billion in cryptocurrencies, reports the specialist service Chain Analysis: an increase of 1,200 percent compared to the previous year.
Digital currency: The necessary processing power is lacking
For Touadéra, Bitcoin is “the people’s currency”. In fact, it owes its existence to a primal democratic impulse – the handing back of money management into the hands of the people. The banking system that has existed since the Fuggers was mercilessly undermined by independent cryptocurrencies: In a Bitcoin state, its central banks are powerless – and with them the access possibilities of greedy rulers who use the treasuries of states. At least in theory, cryptocurrencies are revolutionary.
In practice it looks poorer. President Touadéra had to celebrate the launch of the Sango Coin in Dubai: the digital capacities in his home country would not have been sufficient for the launch ceremony. Gold and diamonds can be mined in the Central African Republic, but not bitcoins: the processing power and internet bandwidth required to produce digital coins are as rare on the Ubangi River as there are deck chairs.
Experts doubt whether this will happen temporarily. There one refers to the example of El Salvador, where the initial enthusiasm about the Bitcoin coup soon gave way to disillusionment. The Chivo Wallet application program, which was launched last year and is required for handling Bitcoin, was hardly downloaded after a brief boom, according to crypto expert Ganesh Viswanath-Natraj from the English Warwick University: 86 percent of Salvadorian business people have not yet had a single transaction performed with the Chivo wallet. The reasons for this are no secret: Bincoin has proven to be an unsuitable means of payment, primarily because of its instability.
Digital currency: Extremely fluctuating value
Within a decade, the value of the cyber coin fluctuated between 100,000 euros in February 2011 and more than 60,000 euros in November 2021. Bitcoin repeatedly experienced falls of up to ten percent within a few hours, a nightmare for every commodity trader. Even crypto fan Elon Musk had to realize that the digital yo-yo is unsuitable as a means of payment: In May of last year, the Tesla boss revoked the acceptance of the crypto currency by his company, which he had trumpeted two months earlier.
Other African wreckage states have therefore taken other paths to replace their failed currencies. In Zimbabwe, autocrat Emmerson Mnangagwa will introduce gold coins because the Zimbabwean dollar, which has been devalued, discarded and then reintroduced countless times, is no longer trusted. Since it was released almost half a century ago, the price of gold has only increased tenfold – and not, like Bitcoin, sixty thousand times in just ten years (only to then crash again to a third of its record value).
It is less risky to tie the crypto ducats to your own currency and continue to have them controlled by the central bank, which is also being tried in all countries. The Nigerian eNaira or the Ugandan eCedi will soon allow West Africans to make bankless transfers over the Internet: a hybrid between wrinkled banknotes and banking that has been revolutionized away. However, since control over the value of the money remains with the state bank, this no longer has anything to do with a “crypto” currency.
In reality, even in Africa, Bitcoin is currently being used at most as play money by adventurous gamblers or as secret money for drug dealers, gun dealers and African would-be rulers. US economist Paul Krugman dares to doubt that this will change at some point: the digital ducat is a “bubble wrapped in techno-mysticism and libertarian ideology,” according to the Nobel Prize winner. A chimera whose brilliance sooner or later fades.