Bitcoin failure in CAR reveals loopholes that must be fixed before the continent is ready to adopt cryptocurrencies widely.
- The Central African country has shown that even the legislature must fully understand cryptocurrency’s economics
- The previous Bitcoin 2022 law amendment was primarily based on the controversial sentiments from the Economic and Monetary Community in the CAR
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One year ago, the Central African Republic legalized Bitcoin, the second country to do so after El Salvador. The move by CAR was promising for African Bitcoin proponents, as many thought that this was a move that other countries would follow, but the flame died down before it could turn to fire. With the world moving towards clean energy, there was hope that Africa, with the surplus supply of renewable energy for large-scale global bitcoin mining, would use CAR to help achieve zero carbon emission.
However, one year later, the Central African Republic reversed its decision. The parliament repealed the legislation stating that Bitcoin and other cryptos were legal tender. The previous Bitcoin 2022 law amendment was primarily based on the controversial sentiments from the Economic and Monetary Community in the CAR. The community stated that it was impossible to trade with Bitcoin at this time since many people, nearly 85 per cent of the market, did not know what Bitcoin was.
The legislature adopted the amended law (to remove Bitcoin as legal tender) to the last man on March 23, 2023.
Why bitcoin legalization was bound to fail in CAR
CAR is among the poorest countries globally; electricity penetration is 12 per cent with limited internet connectivity. Political instability in the country is also one atop the significant hindrances to digital economy growth. Since gaining independence, the CAR has experienced tolls of instability and violence.
The internet challenge complicates crypto adoption in the CAR
According to many crypto experts, bitcoin’s success as a legal currency in the CAR appeared unachievable in the short term. It needed more time to actualize the decision for several reasons.
- The internet penetration rate is low. Bitcoin critics find it difficult to understand why an internet penetration rate of less than 12 per cent has chosen Bitcoin as its transacting currency.
- The CAR has an infrastructure deficit, and mobile connections stand at only 30 per cent of the population. These challenges render the case for adopting Bitcoin less convincing.
- There high internet prices in the country are impeding adoption efforts. The country’s uncertain institutional situation constrains investment in broadband networks and access to cross-border submarine cables. Consequently, the Central Africa Republic relies on expensive satellite connections for most of its international internet bandwidth. This eventually translates to high internet prices.
- There is still a negative attitude towards Bitcoin adoption in the CAR and Africa. A few days after the decision to legalize Bitcoin, there was a disagreement among the Members of Parliament, with some challenging whether there is any urgency to fund Bitcoin adoption.
Despite these discouraging challenges, bitcoin proponents and supporters still hold their ground that the Central Africa Republic’s decision proves that digital currencies have a role to play, particularly for countries not included in the global financial system.
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Is Africa ready to adopt cryptocurrencies as legal tender?
With all that has happened in the last year, the move by CAR has been a goose chase. The Central African country has shown that even the legislature must fully understand cryptocurrency’s economics. This begs the question, what is the position of cryptocurrencies in Africa? The bitcoin failure in CAR reveals loopholes that must be fixed before the continent can widely adopt cryptocurrencies. Electricity and internet penetration need to be intensified. Crypto and blockchain education must be availed at the grassroots levels for the target audience to understand the market.
The CAR has a population of more than 5 million inhabitants who must familiarize themselves with the basics such as a Bitcoin wallet, wallet’s public address recovery or seed phrases. Achieving these basics increases the chances of the CAR to succeed in becoming a country that uses Bitcoin as a legal tender.
Crypto education for the larger population should also be accompanied by the CAR working with players in the crypto space, like cryptocurrency exchanges, payment processors, and wallet providers. Just like El Salvador, which sought the services of Bitso (a cryptocurrency exchange in Latin America), the Central African Republic also needs to partner with a major player in the crypto industry.