Tuesday, January 31, 2023

Herve Ndoba, head of the Bank of Central African States (BCAS), has made calls for a single digital currency common among the 6 nations that form the Central African Monetary Union (CAMU), which it oversees.

The calls come after the Central African Republic not once but twice broke rank with other countries in the region. The first was the adoption of Bitcoin as a legal tender, which the BCAS was unaware of upon their announcement. The second incidence was the launch of the Sango, a digital currency which works on the Bitcoin blockchain. The BCAS cites the potential for unilateral developments in the CAR to destabilise the monetary system in the region.

  • Central African Republic Bitcoin and Sango adoption threaten the monetary Union
  • The Bank of Central African States and the International Monetary Fund have been critical of the moves
  • A single digital currency for the regional block to be accompanied by a uniform framework

The Bank of Central African States and the CFA Franc

The BCAS and the International Monetary Fund have been at the forefront of those critical of the CAR’s move to adopt Bitcoin as legal tender.

Their concerns are that the move is not consistent or congruent with existing currency arrangements in the country and region. The BCAS acts as the central bank for the 6 countries in the region (Cameroon, Gabon, Chad, The Republic of the Congo, Equatorial Guinea, and the Central African Republic) that use the Central French African (CFA) Franc (XAF).

The adoption of Bitcoin as legal tender and the introduction of the Sango create regulatory problems for the Central bank, which has no oversight of the two digital currencies.

The history of the Bank of Central African States

The Bank of Central African States (BCAS) was established in 1973 when a new Convention of Monetary Co-operation with France was signed. It was originally formed by 5 members, and Equatorial Guinea joined in 1985.

The CFA Franc has many critics with the arrangement binding member states to keep reserves with the Banque de France (French Central Bank) at no interest while paying interest on amounts borrowed from the Banque de France. This amounts to an imperialism tax that should not be levied on supposedly independent states.

The adoption of Bitcoin as a legal tender in the region by the CAR causes problems when it comes to monetary security through money supply and money flow concerns. The latter opens up the possibility of both money laundering and financing for terrorism. The latter being a major concern.

CAR adopts Bitcoin and launches Sango digital currency

The Central African republic parliament announced the adoption of Bitcoin as a legal tender in April 2022, becoming the second nation in the world to do so after El Salvador and the first in Africa.

CAR President Faustin-Archange Touadera expressed the desire of the country to move forward and provide a system that would improve access for citizens. The move was, however, embarked upon without any consultations with the BCAS, which stoked tensions.

The CAR further moved to introduce their digital currency, the Sango, which operates on the Bitcoin Blockchain. The Sango also has token gating-like features which allow people to purchase land, residency and even citizenship by bonding their Sango investments for various periods. These two moves threaten the stability of the monetary union in the view of the BCAS and IMF.

Single digital currency for the Central African States

Ndoba proposes that a single digital currency for the region would go some way to deterring the potential problems CAR’s developments introduce to the region. In addition to a single digital currency, he also believes that the region should develop a common digital currency framework and regulations.

This approach would offer some security in the region’s monetary system while allowing citizens of the region’s nations to participate in the next revolution of money. While the comments by Ndoba and BCAS aren’t without merit, you cannot help but feel the hint of self-preservation in them.

The single cryptocurrency for the monetary union could well iron out some of the differences between the CAR and the BCAS. However, we have seen that regulation is a very slow process in Africa and that is something that would need to be worked on to provide solutions in a timely manner.

Read: Central African Republic announces plans for a central bank digital currency

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