Current Economic Situation in the Central African Republic
Source: Blackpast
The Central African Republic (CAR) is one of the poorest countries in the world. Its economic situation is very fragile as it faces several challenges. According to Statista, its GDP per capita is $537.6 as of 2024.
The CAR is a landlocked country located in the heart of Africa's “central” region. It is bordered by the Democratic Republic of the Congo to the South, Chad to the North, South Sudan to the East, and Cameroon to the West.
The capital and largest city of the country is Bangui. Bangui was a French colony in the 19th century, and French became one of its official languages. The country gained independence on August 13, 1960.
They are blessed with abundant natural resources such as diamonds, timber, and gold. Despite this, 70% of the people are living in extreme poverty. They depend solely on agriculture and the export of natural resources for sustainable growth.
Their current economic situation can be divided into different sectors, namely;
- Political instability
Since its independence from France, the Central African Republic has struggled with internal conflict, coups, population displacement, and political instability, which has led to the decline of its Gross Domestic Product (GDP).
An armed group known as ‘Seleka’ from the north of the country controls most of the rural area. This group has prevented the government from establishing authority and providing public services, which has damaged infrastructure, displaced people, and disrupted economic activities.
This insecurity has restrained investors' access to their markets and placed further constraints on their economies. Farmers cannot access their farms or even transport their goods.
- Agriculture Sector
The Central African Republic is recognized for its agricultural sector, which is the backbone of its economy. This sector contributes almost half of its GDP, as almost 74% of its population is involved in agriculture.
The primary food crops include cassava, millet, maize, and plantains, while the cash crops include cotton, coffee, and tobacco. They consume the food crops and export the cash crops to other countries. They also practice livestock farming.
The production of these crops has declined due to conflict and insecurity. Lack of quality farming equipment and bad roads have also contributed to the decrease in production.
- Natural resources
The Central African Republic is blessed with plentiful natural resources, including gold, diamonds, and timber, which can improve its economic situation. However, corruption, illegal exploitation, and lack of transparency have led to the government's loss of revenue.
- Development sector
Insufficient infrastructure has led this country to continue to wallow in poverty. Poorly constructed roads, limited electricity, lack of clean water, and poor communication networks are discouraging situations the inhabitants struggled with.
Additionally, companies are unable to operate efficiently due to an unreliable electricity supply. Most of these companies rely on generators, which are very expensive to maintain.
- Foreign aid
This country relies on foreign aid and NGOs to provide basic services that the government does not provide. The persistent conflict and political instability have led many inhabitants into crises and a need for basic needs. With the help of foreign aid, they receive support ranging from food, healthcare, and funds.
- Inflation
The country suffers from inflation due to the high price of food, fuel, etc., which decreases its standard of living. According to Global Finance, it is one of the poorest countries, as most of the population lives on less than $2 a day.
Crypto Law In the Central African Republic
Source: Kessing Platform
In April 2022, the National Assembly of CAR made Bitcoin a legal tender. It became the first country in Africa to adopt this law. El Salvador and the Central African Republic are the only two countries in the world that have adopted Bitcoin as legal tender.
“President of the Central African Republic, Faustin-Archange Touadéra, while giving his speech, said that with cryptocurrency, there is no more control. You can invest in the nation of your choice without having to go through the traditional financial systems.”
This move was expected to modernize the economy and put it in the spotlight for blockchain technology. The purpose was to attract foreign investors and boost the economy. Due to the volatile nature of cryptocurrency and the nation’s economic challenges, there were many concerns during the adoption.
The concerns eventually became reality as the economy started witnessing a negative turn. In response, the country’s parliament repealed the legislation that gave bitcoin and other cryptocurrencies the legal tender status, and thus, it ceased to be legal tender. This legislature was adopted in March, 2023.
Going forward, the IMF in a detailed report has this to say about the regulation of crypto assets in CAR:
“The legal and regulatory framework for crypto assets in CAR remains incomplete and uncertain, and coordination with the CEMAC in strengthening and clarifying the framework is of paramount importance going forward.”
Current State of Crypto Adoption in the Central African Republic
Source: CryptoSlate
When Bitcoin was enforced, there was much skepticism due to concerns over inadequacy.
“Alfred Kammer, Director of the IMF’s African Department, voiced concern that the adoption of crypto assets as legal tender raises significant risks to financial stability, consumer protection, and financial integrity.”
Following the adoption of Bitcoin as a legal tender, it was revised after a year due to economic challenges maintaining it. For digital currency to be successful, it needs an internet connection, which is absent in CAR.
According to data by the World Bank, only 10% of the population can access the internet. Another hindrance is the lack of sufficient electricity, as only 14% of citizens enjoy electricity. Also, they have limited access to technology.
“Ousmène Jacques Mandeng, a professor at the London School of Economics and Political Science, questioned the adoption. He stated that although Bitcoin facilitates transactions, it is a strange choice as a regular means of payment.”
In 2022, the president of the Central African Republic introduced the Sango coin. This Sango project included creating “Crypto Island” in the Oubangui River. This was to act as a hub for crypto-related businesses with zero taxes.
The president also announced the plan to tokenize the country's natural resources. In addition to Sango Coin, the plan includes boosting the digitization of technology to rebuild the country, which will attract investors.
The President added that the Sango coin aims to tokenize the country's natural resources, such as diamonds, gold, and uranium. In turn, this will attract investors to buy from them, thereby boosting economic growth.
“Ransu Salovaara, CEO of tokenization company Likvidi, spoke positively about this. He said, while ambitious, the adoption of Bitcoin can be a game changer for a country like the CAR, as it offers financial inclusion and access to global markets, bypassing inefficient and carefully addressing regulatory concerns in CAR.”
This is dependent on improving internet access and educating the population on basic cryptocurrency fundamental analysis. Also, it will address the inherent volatility of cryptocurrencies and ensure that this adoption does not lead to further economic instability.”
It is quite notable that the Sango coin has faced many setbacks so far and has performed poorly in capturing the attention of foreigners and citizens of CAR. These setbacks range from court rulings to deposit downtimes.
Advantages and Challenges Facing Crypto Adoption in Central African Republic
Source: Mpvworkshop
The adoption of crypto in the Central African Republic has the following advantages;
- Financial inclusion
The rise of cryptocurrency offers access to digital financial services. With the lack of proper banking infrastructure, individuals can now carry out transactions without using cash. They are not limited to the orthodox pattern of financial service.
- Foreign investment and economic development
It aims to attract foreign investors through blockchain technologies and cryptocurrency. By using crypto, other countries can partner and invest in their tech sector, which can lead to economic growth. For example, tourists can easily pay for goods and services using cryptocurrency.
- Fast and low-cost transaction
Crypto transactions are faster than the traditional methods. It also reduces costs, especially with cross-border transactions.
- Digital growth
The introduction of crypto in the CAR has helped to promote technological infrastructure and encouraged the use of digital means for financial services in the country. For example, foreign investors now see the potential of digital investments in the CAR, as it holds the title of the first African country to adopt a cryptocurrency as legal tender, even though it was for a short while.
Challenges of the Adoption of Crypto in the Central African Republic
Here are some of the challenges;
- Political instability
The weak government system and corruption have hindered the effective operation of crypto. The country consistently experiences unrest. Also, their poor government policies have worsened the economic situation.
- Lack of infrastructure
The Central African Republic lacks access to a stable internet connection, which is essential when dealing with crypto. Many inhabitants do not have access to this and this discourages their use of cryptocurrency for payment.
- Lack of public awareness
Another major challenge is that citizens are not educated on how digital currency works. This lack of education creates an ignorance challenge in their wide use of crypto.
- Volatility of crypto
Due to cryptocurrency's fluctuation, people are scared to venture into it. Many people in this nation are poor and unable to rely on a volatile asset. However, learning about crypto chart patterns can be helpful to maximize profit.
- Fraud risk and insecurity
In a country with limited technology and infrastructure, they are vulnerable to fraudsters.
The Potential for Cryptocurrency in the Central African Republic
The potential for crypto in the CAR is both complex and interesting due to its economic challenges. Here are some of the key promising aspects of crypto;
- Financial Inclusion
In CAR, most people do not have access to cash because banks are underdeveloped. Adopting crypto helps to recreate an alternative way to access financial services. With crypto, people can complete financial services without any hassle.
- Blockchain Technology
The use of blockchain will help to improve transparency. Creating a land registry using blockchain helps to secure and resolve any issues. It also creates transparency in the supply chain, especially in the diamond and gold industry, where smuggling is common.
- Economic Growth
The major aim of the government's adoption of Bitcoin is to grow its economy. Foreigners could complete transactions while in the country.
Factors Driving Adoption
Key factors driving the adoption of crypto in the Central African Republic include;
- Economical factor
Economic challenges, such as inflation and a lack of banking infrastructure, have led to the adoption of crypto. Crypto has offered an alternate store for people to save their wealth and hope for gains.
- Political factor
The high level of corruption in CAR has discouraged citizens from keeping their money in banks. The decentralized platform creates trust and control over citizens' money and valuables. It also helps them protect their assets against the government's interference.
- Technological factor
With the adoption of crypto, there will be increased availability of internet connections and phones. This allows easy transactions and storage through a hardware wallet.
- Socio factors
Cryptocurrency in the CAR has helped raise awareness in other countries and advocate for support, thereby promoting a culture that fosters innovative ideas.
Cryptocurrency Usage in Various Sectors
Source: Maldives Business Times
Cryptocurrency usage in various sectors of CAR include
- Banking sector
Crypto offers an alternative due to the lack of banking infrastructure. Instead of going to a banking hall, you can send and receive payment from the comfort of your home. Crypto is used as a low-cost method for border transactions.
For example, the government wants to develop a ‘Crypto Island’ in Bangui. This ‘Crypto City’ will be a special economic zone.
- E-commerce sector
In CAR, crypto is used in the e-commerce sector as a means to pay for goods and services. It is very helpful for retailers, making it easy to buy and sell through digital currencies. They use crypto and tokens to generate customer loyalty programs and give rewards in the form of crypto.
- Healthcare Sector
With the use of blockchain, you can track the authenticity of drugs to prevent people from using fake drugs. They also use this to improve the management of medical records and protect privacy.
- Education Sector
You can decide to pay your tuition fees using crypto in the Central African Republic. The use of blockchain in the education sector can help safeguard and manage student records, reducing fraud and increasing transparency in the education system.
- Government Sector
Using cryptocurrency to pay taxes makes collection easier and faster. It also allows for transparency in the voting system to ensure fair and square voting. The government can use the Sango coin to propose e-residency to attract foreigners to invest in their economy.
Conclusion
The Central African Republic's previous adoption of Bitcoin as legal tender, though hasty, signals a potential application of virtual assets in the financial sector once again in the near future. They did it before; they could do it again. Although challenges like limited infrastructure and political instability pose a threat to this emerging technology.
With proper financial and strategic planning, economic considerations, regulatory support, and public education, the CAR may rise from the ashes as a beacon of hope and be an example for other emerging economies in Africa. The Sango coin may be underperforming at the moment, but with legal and infrastructure revamps, it may just be the next big alpha. After all, the bull run is here; volatility is at its peak.
