The CAR recognizes Bitcoin as its official currency, on a par with the local fiat. Earlier, El Salvador made a similar decision, and it is already clear that this experiment failed. Let’s analyze what awaits the Central African Republic after such a decision.
A few words about the CAR
It is one of the most backward countries. It ranks third from the bottom in terms of GDP per capita, and the average age of people is 50 years due to HIV/AIDS and other serious diseases.
Crime reigns in this country, and there are practically no laws that work. One might ask why the CAR makes Bitcoin its official currency but does not try to solve acute social problems.
There are several opinions as to why this is happening. First, there are still rich people in the developing countries of Africa. Usually, these are government members, descendants of European colonialists, or the mafia. These people want to make sure that they and their children do not need anything in the future, so many of them keep their savings in cryptocurrencies.
Paradoxically, every year the number of investments in cryptocurrencies from this continent grows by almost 2,000% annually; in 2021, this market accounted for 3% of the total turnover of digital currencies. This percentage is expected to snowball shortly.
The second possible reason the CAR government has taken this decision is that it may hope that such actions to modernize the financial system may lead to additional investment from foreign entrepreneurs.
On the one hand, it is possible because this industry is actively developing and has excellent capitalization. On the other hand, ordinary residents of the country are unlikely to be able to take advantage of such innovations since they have neither the equipment nor the understanding of how the Internet works.
Another less weighty but logical reason is the desire to remind the whole world of oneself through some unusual activity. Practice shows that many heads of lagging countries seek to do something similar to distract the population and potential partners from apparent problems.
So, for example, the ruler of North Korea, instead of solving problems with hunger in the regions, the lack of educational and scientific development (not to mention the lack of freedom of speech and the ban on the Internet), he begins to test nuclear weapons.
It is difficult to say whether the Central African Republic will be able to turn the tide by adopting such bills. Time will tell.
The results of El Salvador on the introduction of cryptocurrencies
El Salvador is also not included in the list of the wealthiest countries in the world (although the situation is better than in the CAR). However, it became the first country to legalize Bitcoin and put it on par with the current fiat currency.
To quickly popularize such a decision, the government created a crypto wallet for every country’s citizen, where there was already a certain amount of bitcoins. It happened in September 2021, and today you can already see the first consequences of this decision.
In the winter of 2022, the International Monetary Fund called on El Salvador to abandon this decision, as such use of cryptocurrencies, in its opinion, has too many risks. On the one hand, the use of cryptocurrencies dramatically simplifies the work of the banking system, reduces the cost of transactions, and makes all financial transfers more secure.
However, at the moment, Bitcoin is a currency whose value changes at a tremendous rate. It is not regulated by anything, so if one whale decides to withdraw his money or another significant incident occurs, this will lead to a massive collapse in the rate. Of course, it will return to the old indicators again in a few months, but such jumps can become a real crisis for the economy as a whole.