The Central African Republic Decides To Adopt Bitcoin As Legal Tender

When countries decide to adopt a digital currency as a legal tender, they legalize its usage.

El Salvador was the first country to adopt Bitcoin as its legal tender.

A year later, the Central African Republic took the same bold step.

It is the first African country to accept Bitcoin as its legal tender.

Since then, both CFA Franc and Bitcoin can be legally used to buy and make transactions in CAR.

It is expected that the legalization of Bitcoin in CAR will help reduce the country's dependence on the US dollar for international transactions.

When El Salvador legalized the use of Bitcoin, it generated a public outcry from its citizens and criticisms from financial institutions such as the IMF.

It is believed that cryptocurrencies are volatile and should not be made a legal tender by any country.


The wide acceptance and embrace of digital currencies across the globe continue to grow by the day. As big brands across all facets partner with tech giants and developers to launch their blockchain token or queue into an existing digital asset as stakeholders.

While these partnerships and consensus are welcome developments, it will be a huge boost to see governments and agencies making regulations, policies, and laws towards embracing cryptocurrencies.

El Salvador was the first country to adopt Bitcoin as a legal tender. Even though the transactions made using Bitcoin hit a snag, it is still on record that El Salvador took the giant step.

After a year, The Central African Republic became the second country to adopt Bitcoin as a legal tender.

It is the first African country to do so, outpacing their continental crypto-enthusiasts, Nigeria and Kenya, to such a decision.

The Central African Republic, popularly called CAR, is a landlocked country located in Central Africa.

As of 2020, the country has approximately 5.4 million people. In 2019, CAR’s gross domestic product (nominal) stood at $2.321 billion. Of the 5.4 million people, according to the 2020 census, about 71% of the inhabitants live below the international poverty index.

The Central African Republic is rich in several mineral resources, including gold and diamonds, among others.

One would expect that the country and its citizens should wallow in a lot of wealth with an abundance of valuable mineral resources. Instead, the nation is ravaged by poverty, underdevelopment, political instability, and violence.

The adoption of Bitcoin as their legal tender was a game-changer, however. Since then, they have attracted particular attention from crypto enthusiasts.

In this article, we shall identify the events surrounding the adoption of Bitcoin as a legal tender by the Government of the Central African Republic (CAR) and the aftermath.

Let's dig in.


How Bitcoin Became The Legal Tender Of CAR

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Experts believe that the main reason behind the legitimization of Bitcoin in CAR is to reduce their dependence on the US dollar for international trading and transactions.

The Central African Republic is a Russian ally. The United Nations made it known that Russian mercenaries have provided military assistance to the war-ravaged zone.

According to the law, Citizens can make Tax contributions and payments to the government-registered platforms using Bitcoin.

Having discussed the adoption of Bitcoin as a legal tender in the Central African Republic, it is pertinent to examine the possible effects on their economy.


Influence Of Bitcoin On The Central African Republic

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Since the passing of the bill into law, making Bitcoin a legal tender alongside Franc CFA, experts have continued to monitor the economy surrounding the crypto market in CAR.

Some experts think that the scenario in El Salvador might repeat itself in the central African Republic. The people protested when El Salvador made Bitcoin its legal tender, and there were also criticisms from the International Monetary Fund (IMF).

The IMF projects that the adoption of Bitcoin is likely to affect the economy of the Central African Republic negatively.
Bitcoin is a volatile asset; it can fall drastically without control or regulation.

The IMF further emphasized that it poses a risk to consumer protection and financial stability. Such a volatile and unregulated currency should not be a legal tender for a country.

Some experts believe that adopting Bitcoin as a legal tender will help increase the awareness and usage of the digital token among CAR citizens. Statistics show that 11% of the entire citizens use the internet.

When the citizens realize that they can make purchases and other financial transactions via the internet, their usage will increase over time.

Finally, the adoption will help countries that export their mineral resources for international trade reduce their dependence on the US dollar.

Bitcoin is accepted globally; the Central African Republic might start taking it to exchange their exported mineral resources.


Conclusion

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It is shocking to know that with the general acceptance of Bitcoin as a means of transaction globally, just two countries have fully adopted it as a legal tender.

Experts believe the volatility and centralized nature make it difficult for countries to use cryptocurrencies as legal tender.

Since the Central African Republic adopted Bitcoin as one of its legal currencies, no significant event or happenings have occurred that could share the country's economy. We are, however, anticipating the events that will unfold in the coming days.



Author: Valentine A., Gate.io Researcher
This article represents only the researcher's views and does not constitute any investment suggestions.
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