Divide
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 this.
Bangui – It was not an April Fool’s joke – the message from the President of the Central African Republic arrived 27 days too late. In a statement riddled with spelling mistakes, Faustin-Archange Touadéra announced at the end of April the adoption of Bitcoin as the official currency of his country. In this way, “the fate of the Central African population will be revolutionized”, justified Touadéra of his international sensational decision: “Our country is the most courageous and the most far-sighted in the world”.
Indeed, 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 .
Clean cryptocurrency: Central African Republic introduces new means of payment
Two months later, the president surprised those who did not want to believe Touadera’s original statement with another coup. The Central African Republic (ZAR) will also launch its own cryptocurrency, the Sango Coin, the 65-year-old has announced. And finally, “Africa’s first crypto hub,” a tax-free crypto haven, will be built on an island in the mighty Ubangi River.
What Touadéra failed to mention: The CAR is ranked 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 has access to the Internet – the prerequisite for dealing with digital currency. In this context, Touadera’s decision was to sound like an announcement by the Principality of Liechtenstein that it was going to acquire a navy.
Digital currency: means of payment to reward mercenaries
It is already disputed whether Touadera’s ministerial team is actually a government. He controls only a fraction of the country from the capital, Bangui. The mathematics professor tries to protect himself from the threat of Russian mercenaries: at present, there are said to be about two thousand fighters of the famous “Wagner troops” in the troubled state.
Probably one of the reasons for the Bitcoin idea: Russian mercenaries can be paid with the secret currency without conflicting with the sanctions regime imposed on Russia by the West.
Unlike banks and their Swift system, Bitcoins cannot be controlled: even the authorities of the American superpower are unable to prevent or track transactions made with the cryptocurrency. Russian companies affiliated with the Wagner Group and involved in the exploitation of gold and diamond mines in Central Africa can also use digital means of payment to repatriate their profits: two birds at once and two at zero for the Bitcoin.
Aversion for France: cryptocurrency to replace the 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 only currency, the Central African Franc (CFA). Its exchange rate is linked to the euro and the central banks of the six countries participating in the CFA must deposit half of their deposits in Paris. The fact that Touadéra allows himself to be protected by the Russians is seen as a deliberate affront to France: Paris and Moscow are currently engaged in a competition for political and economic influence in several African countries. The introduction of bitcoins would be the start of the farewell to the CFA, according to cryptography 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, gross domestic product per capita 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 inhabitants have a very low life expectancy.
main export products are pearls, gems and precious metals in addition to wood. Much of the gold and diamonds are smuggled out of the country. Rebel troops and militias use illegal revenue to finance their arms purchases.
The government aims to raise $1 billion by issuing the country’s first digital currency, Sango. The Sango is set to launch on July 25. With the digital coin, the country is creating the conditions for a blockchain-based economy, according to a government strategy document.
Of course, the Bangui government officially justifies its decision differently. Local children living abroad could transfer their remittances to those at home much faster and easier, it is said: With Bitcoin electronic transactions, banks and their fees are avoided. Optimists see digital payments as a unique opportunity for Africa, where more than half of the population is unbanked. Finding a bank branch in rural areas in particular is like finding an oasis in the Sahara. A lame comparison in the eyes of many who see banks not as givers of the elixir of life, but as ticks eating their fill in the financial blood of a society.
Between July 2020 and June 2021, Africans transferred over $100 billion in cryptocurrencies, according to Chainanalysis, a 1,200% increase from the previous year.
Digital currency, but no internet: experts doubt
For Touadéra, Bitcoin is “the currency of the people”. In fact, it owes its existence to an overriding democratic impulse – the return of the management of money to the hands of the people. The banking system that has existed since the Fuggers has been ruthlessly undermined by independent cryptocurrencies: in a bitcoin state, central banks are powerless – and with them the access opportunities of greedy rulers using their states’ treasuries. At least in theory, cryptocurrencies are revolutionary.
In practice, it seems poorer. President Touadéra was due to celebrate the launch of the Sango Coin in Dubai: the digital capacities of his country of origin would not have been sufficient for the launch ceremony. Gold and diamonds can be mined in the Central African Republic, but bitcoins cannot: the processing power and internet bandwidth needed to produce digital coins are as scarce on the Ubangi River as there are deckchairs.
Experts doubt that will ever happen. We refer here to the example of El Salvador, where the initial enthusiasm aroused by the Bitcoin coup quickly gave way to disillusionment. The Chivo Wallet app, which was launched last year and is needed to manage Bitcoin, is now almost undownloaded after a brief boom, according to crypto expert Ganesh Viswanath-Natraj of English University. of Warwick: 86% of Salvadoran businessmen do so. not yet a single Transaction made with the Chivo Wallet. The reasons are well known: Bincoin turned out to be an unsuitable means of payment, mainly because of its instability.
Risky means of payment: Extremely fluctuating rates for cyber currencies
In a decade, the value of the cyber coin has fluctuated between one euro in February 2011 and more than 60,000 euros in November 2021. Bitcoin repeatedly experiences drops of up to ten percent in a few hours, a nightmare for any commodities trader. Even crypto fan Elon Musk must have realized that the digital yo-yo was unsuitable as a means of payment: in May last year, the Tesla boss revoked his company’s acceptance of crypto- currency, which he had announced two months earlier.
Other wrecked African states have therefore taken other routes to replace their failing currencies. In Zimbabwe, autocrat Emmerson Mnangagwa wants to introduce gold coins because no one trusts the Zimbabwean dollar, which has been devalued, discarded and then reintroduced countless times. Since its release 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 fall back to a third of its all-time high ).
Central African Republic: Own cryptocurrency probably remains a future fantasy
It is less risky to peg crypto ducats to one’s own currency and continue to have them controlled by the central bank, which is also experienced in various African countries. The Nigerian eNaira or the Ugandan eCedi will soon allow West Africans to make bankless transfers over the Internet: a hybrid between crumpled banknotes and banking that has been revolutionized. However, since control of the value of money remains in the hands of the state bank, it has nothing to do with a “crypto” currency anymore.
In reality, even in Africa, Bitcoin is currently used at most as play money by adventurous gamblers or as secret money for drug smugglers, arms smugglers and would-be African leaders. The American economist Paul Krugman dares to doubt that this will change at some point: the digital ducat is a “bubble shrouded in techno-mysticism and libertarian ideology”, according to the Nobel Prize winner. A chimera whose brilliance fades sooner or later. (Johannes Dieterich)