The Second Domino Falls: The Central African Republic Adopts Bitcoin

  • The Central African Republic is the second country in the world to make Bitcoin legal tender.
  • The world’s most precarious economies are likely to adopt Bitcoin first.
  • Sovereign Bitcoin adoption is likely to increase.

On 27 April, the Central African Republic became the second country in the world to adopt Bitcoin as legal tender. The law making Bitcoin legal tender was passed unanimously by the country’s National Assembly. In a statement to Reuters, Obed Namsio, chief of staff of President Faustin-Archange Touadera, said the law would “improve the conditions of Central African citizens” and that it was “a decisive step toward opening up new opportunities for our country”. The Central African Republic is one of six nations in the Economic and Monetary Community of Central African States (CEMAC), whose central bank is the Bank of Central African States (BEAC). Its currency, shared with 14 other nations, is currently the CFA franc. Bitcoin is to be legal tender alongside the CFA franc.

According to the World Bank, the Central African Republic “is one of the poorest and most fragile countries in the world despite its abundant natural resources.” Similarly to El Salvador, it has a recent history of violence and economic instability. A large portion of its population is unbanked and it is becoming harder and more expensive for its citizens to receive money from abroad. Bitcoin adoption could be a way to combat these economic challenges. Internet usage is limited in the country and few are likely to understand or use Bitcoin at the beginning. If the Bitcoin law is coupled with measures to expand the country’s digital infrastructure and improve digital literacy, however, Bitcoin adoption could lead to vast economic growth. Like with El Salvador, the move has been condemned by the IMF, which has warned the country of the dangers of Bitcoin.

Sovereign Bitcoin adoption is likely to start with the most economically-precarious countries, as they will seek monetary stability. As global macroeconomic conditions worsen and the risk of stagflation looms, it is likely that other vulnerable countries will also adopt Bitcoin. This adoption could lead other countries to follow and create a snowball effect.
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