Less than two weeks after announcing the legalization of bitcoin as legal tender, the Central African Republic (CAR) made public the plan to launch its own crypto investment hub. Both news secured CAR’s position under the spotlight of the crypto-related news during the entire month of May, especially since the country was the first one in Africa to adopt bitcoin as an official currency.
CAR’s President Faustin-Archange Touadera does not hide his excitement to start growing CAR’s economy and make it run far from formality and traditional arrangements. The future plans are focused on slowly freeing the national economy from the bureaucracy that hampers the adoption of more modern payment systems and keeps the country several spots behind other nations when it comes to economic growth.
However, despite the potential of the idea and the positive impression these initiatives might cause, crypto experts seem to be a little weary of CAR’s plan to boost crypto adoption. This is because the necessary structure to keep bitcoin active and maintain this industry crosses the line of what many small African economies can afford. At the same time that we experience a wave of crypto popularity around the world, the pillars that make this technology stand don’t make it to news headlines quite often. It takes expertise and background knowledge to understand that crypto adoption does not simply rely on one’s willingness to make it work – it is necessary to think about what is needed to make it an effective reality.
According to the Cambridge Center for Alternative Finance (CCAF), behind the use of bitcoin and its rising popularity, there’s a yearly energy consumption of about 115 terawatt hours, which is almost the same amount that a small country consumes each year. This comparison is one of the factors that make experts raise their eyebrows when questioned about the next steps in CAR’s crypto race. Is the country really ready for a monetary system that requires THAT much?
This one-million-dollar question is actually rooted in a deeper reflection that applies not only to the Central African Republic but also to many other countries in the same situation. As cryptocurrencies are still a growing sector and unexplored in many ways, we can only wonder if the industry will make up for the resources and the efforts that countless nations are making to embrace them. CAR’s (and many other African countries) claim that crypto adoption will upgrade their economies to the next level, bringing more stability and possibilities to citizens who have long been struggling with the downturns of their weak economies and everything it lacks. For millions of citizens in Africa, cryptocurrencies are a tool to dribble financial repression and the light at the end of the tunnel that brings possibilities to escape unfair regulations of capital control.
However, the debate on this matter goes beyond CAR’s reality and enters a different scope – here, we are talking about the value that cryptocurrencies add to society against the impacts they may bring. The reason why this debate is a tad more serious when it involves African economies is that in many of them, basic resources such as electricity are still far from stable and widely available. Despite the hopes that crypto adoption will enable an inclusive growth that is likely to positive impact CAR’s citizens, currently, the 5 million individuals that live in the country still have to face the challenges of making their lives in a country that has one of the poorest and most economically weak economies in the world. Statistical data from the World Bank for 2021 estimates that more than 70% of CAR’s population still lives below the poverty line and has to survive on an income of less than $500 per year. Not to mention that 85% of the population does not have access to the Internet.
On top of the aforementioned issues, CAR’s decision to officialize bitcoins also caused controversy because the country does not have its currency. Like El Salvador – the first nation to declare bitcoin legal – that uses U.S dollar, the Central African Republic uses the franc, which is also the official currency in other 14 African countries that were once French colonies. So, if CAR wants to make its bet on cryptocurrencies pay off, it will have to overcome some obstacles first. Or maybe crypto adoption IS the way to overcome some challenges.
President Touadera seems aware of these issues but is hopeful that adopting bitcoin will guarantee a spot for CAR in the list of visionary countries, which will attract positive attention to the country. Geopolitical experts also envision that the decision might help unglue the Central African Republic’s financial system from the French economic system, which can also be a win for the country and represent more possibilities beyond the use of cryptocurrencies. So, let’s say that CAR’s decision may unlock a lot of really fruitful scenarios for the country but may also go sideways. We are unsure which side will weigh more but are committed to following every event inside the country’s new crypto bubble.
George Hung our chief of staff is a leader in management and B2B relations, running multiple successful business across many boarders.
