The Central African Republic’s (CAR) unexpected adoption of bitcoin demonstrates that the top cryptocurrency can be used as a substitute for fiat currency. However, the African country’s telecommunications infrastructure still requires significant investment. The CAR should also prioritize education to help the general public become more familiar with cryptocurrency fundamentals.
There is little doubt Central Africa Republic’s decision to designate bitcoin (BTC) as legal tender has surprised many. Few people expected CAR — one of Africa’s most impoverished countries and one whose economy has been ravaged by a civil war — to be the first to adopt bitcoin.
For critics still trying to understand why another nation has joined El Salvador in making bitcoin legal tender, the CAR’s move is perplexing. To begin with, they cannot understand how a country with such a low internet penetration rate — less than 12% — has chosen the top cryptocurrency as its transacting currency.
The Central Africa Republic’s reported infrastructure deficit and the fact that mobile connections are only available to 30% of the population seemingly renders the case for adopting bitcoin less convincing. Also, according to a 2018 ICT Profile of the CAR, the country’s then “uncertain institutional situation” was said to be constraining investment in broadband networks and access to cross-border submarine cables.
As a result of this and many other factors, the Central Africa Republic, according to the ICT profile, has had to rely on expensive satellite connections for most of its international internet bandwidth and this translates to high internet prices. Expensive internet is one of the many barriers that impede adoption efforts.
Despite these seemingly insurmountable challenges, proponents of bitcoin and supporters of an alternative financial system are adamant the Central Africa Republic’s decision proves digital currencies have a role to play. This is particularly true for countries that are cut off from the global financial system.
For followers of Friedrich Hayek, a famous Austrian economist and proponent of private money, the adoption of bitcoin by El Salvador and now the Central Africa Republic proves he was right — there is indeed a place for private money.
Despite the strong opposition from institutions like the International Monetary Fund (IMF), some believe more countries will still make bitcoin legal tender. In fact, reports that some 44 countries were represented at El Salvador’s recent bitcoin exhibition suggest more countries might follow in the footsteps of these two countries.
While it is logical to assume that the CAR plans to invest heavily in the development of the telecommunication infrastructure, the mere increase in the sum of funds earmarked for this is no guarantee this will also lead to changed attitudes towards bitcoin.
The CAR must therefore ensure it has funds reserved for efforts that are aimed at boosting the population’s understanding of bitcoin and how to buy bitcoin for the first time. Indeed, education is still key to eradicating ignorance, not just in the Central Africa Republic but across much of the developing world.
A majority of the CAR’s more than 5 million inhabitants must become acquainted with the basics such as a bitcoin wallet, recovery phrases or a wallet’s public address. When that is achieved, the chances of the CAR succeeding in becoming a country where bitcoin functions as legal tender and a transactional currency will be greatly enhanced.
On top of educating its population, the CAR needs to work with players in the crypto space like cryptocurrency exchanges, payment processors, and wallet providers. Just like the first country to adopt bitcoin El Salvador, which has since sought the services of a cryptocurrency exchange, the African country also needs to partner with a reputable player in the industry.
If the Central Africa Republic decides to follow the recommendations suggested in this article, it could well achieve its goal of seeing bitcoin become the country’s reference currency much sooner. The same is true for any other country that wants to make bitcoin an alternative legal tender.
