Making Bitcoin Legal Tender In Africa: How CAR Can Find Financial Freedom

Bitcoin advocates have visited the Central African Republic and offered advice on how the country can best adopt BTC as legal tender.

The Central African Republic (CAR) shocked the world when its president announced that the country had adopted bitcoin as legal currency.

While some assumed that another nation would eventually follow the steps of El Salvador, which last year became the first country in the world to declare bitcoin a lawful currency, most didn’t expect this small African nation to be the one to follow suit.

But several factors may make the CAR a logical destination for bitcoin adoption. The CAR has one of the lowest gross domestic products (GDPs) in the world. Its population, for the most part, is kept outside of the financial system and unwillingly shielded from technological developments like smartphones and the internet.

Intrigued by the conditions of the second country in the world to adopt bitcoin as formally-recognized money, a cohort of Bitcoin experts and enthusiasts, calling itself the Bitcoin Delegation, flew to the Central African Republic to understand more about the situation on the ground and to see how it could help enlighten CAR officials on ways to leverage Bitcoin for good.

The delegation is composed of Alex Gladstein, head of strategy at the Human Rights Foundation; Stacy Herbert, CEO of El Zonte Capital; Samson Mow, CEO of JAN3; Fodé Diop, CEO of the Bitcoin Developers Academy; Nicolas Burtey, CEO of Galoy; Noor El Bawab, director of partnerships at Galoy; Sebastien Gouspillou, CEO of BitBlock Data Center; Richard Détente, CEO of Détente Coopération; David Oren, co-founder of Solarly; Jean-Christophe Busnel, organizer of Surfin’Bitcoin and StackinSat; Josselin Tonnellier, co-founder of Surfin’Bitcoin and StackinSat; Gloire Wanzavalere, co-founder of Kiveclair and Africa Bitcoin Conference; Gilles Cadignan, CEO of Woleet; Jeff Gallas, CEO of Fulmo; and Lionel Jeannerat, CEO of PVHIstoire.

However, only seven traveled to the CAR: Burtey, El Bawab, Gouspillou, Oren, Busnel, Cadignan and Wanzavalere.

Burtey, CEO of Bitcoin banking software company Galoy, the developers of the Lightning wallet utilized by El Salvador’s Bitcoin Beach community, spoke with Bitcoin Magazine to share the findings of the group’s recent trip to the Central African Republic.

A Lack Of Infrastructure

“The first thing that is striking is that there is no infrastructure in the country,” Burtey said. “Meaning that there is barely electricity or internet in the country, even if you’re in the capital city.”

As of 2009, less than 1% of the CAR population had access to banking services, according to a study by the International Monetary Fund (IMF). By 2017, account ownership at a financial institution or with a mobile-money-service provider was 13.75% of the population aged 15 years or more, per World Bank data. For comparison, the percentage of El Salvador’s population with access to the banking system was around 30% that year, per World Bank data.

Also according to the World Bank, the Central African Republic’s population has precarious access to electricity and internet. As of 2020, only 15% of the population had access to electrical power in the country and 10% used the internet. When it comes to mobile cellular subscriptions, only 38 in 100 people in the CAR had one as of 2020. Internet access is even worse when considering fixed broadband access — the country sees only 0.01 per 100 people with a subscription to such a service.

While some marginalized communities have been able to fight through adversity and leverage bitcoin for financial empowerment, a nation-wide adoption of the P2P currency depends on at least some minimal infrastructure.

Notably, satellite-powered solutions such as Elon Musk’s Starlink could aid the CAR in increasing its internet access. Musk recently flew to Brazil to launch the service in the Amazon rainforest, a push to increase access to internet connection in that rural and isolated area.

Bitcoin infrastructure company Blockstream also provides satellite-based solutions, specifically geared toward Bitcoin. Its Blockstream Satellite broadcasts the Bitcoin blockchain around the world 24/7 for free, protecting against network interruptions and providing areas without reliable internet connections with the opportunity to use Bitcoin. However, receiver equipment costs could be a barrier for the CAR.

A Lack Of Understanding

In addition to a lack of infrastructure in the country, there is also a deficit of proper understanding of Bitcoin.

Government officials — and the population at large — don’t yet grasp the power of Bitcoin. It seems only the CAR president, Faustin-Archange Touadéra, really possesses knowledge about the peer-to-peer currency, a phenomena that has led the nation to effectively put the cart before the horse.

“My understanding is that the president is the one who decided to adopt Bitcoin,” Burtey told Bitcoin Magazine. “He has a PhD in mathematics with a focus on cryptography. But many other members of the government, pretty much everyone, don’t really understand the difference between ‘crypto’ and Bitcoin.”

Much of the Bitcoin Delegation’s work was in improving that lack of basic understanding. Burtey explained to Bitcoin Magazine that in its conversations with government officials, the group attempted to demonstrate why the nation would be better off focusing on Bitcoin alone instead of embarking on the novel, esoteric use cases promised by tokens and “crypto.”

“Hearing from us, they have heard a different way to go forward with Bitcoin adoption,” Burtey said when commenting on the Sango project, an initiative by the CAR government to lure crypto investors to the country.

Sango was announced in late May, before the Bitcoin Delegation stepped foot in the CAR. Sango seeks to “pave the way to a digital future of endless possibilities,” per its webpage, though the project conflates bitcoin initiatives with NFTs and metaverse pilots.

“I attribute this to the fact that this is all new to [CAR officials] and they see all of these possibilities,” Burtey said. “Every time someone mentions something to them, they say, ‘Oh yeah, that’s a good idea.’”

The people Burtey is referring to there are foreigners from the cryptocurrency industry who have been to the country. The Galoy CEO said he believes the Bitcoin Delegation was the first group of Bitcoin-only advocates to arrive in the country with an agenda of helping the government and the people adopt BTC, with some crypto-related delegates having visited the CAR before them.

The CAR population has not only been kept in the dark regarding Bitcoin, but it is further held back by the lack of proper conditions for its adoption to flourish. While it catches up, the country could start benefiting from the P2P currency before those issues are resolved in at least one way: through exports.

A Lack Of Monetary Freedom

Being under the CFA franc system, huge hurdles exist for the Central African Republic to be able to sell its natural resources to foreign nations.

According to the IMF, the CFA franc zone consists of 14 nations in sub-Saharan Africa. Eight countries comprise the West African Economic and Monetary Union, while six make up the Central African Economic and Monetary Union. The CAR is part of the latter.

All of the 14 nations in the zone, of which only two were not French colonies, adopt the CFA franc as their official currency.

As explained by Gladstein in his essay “Fighting Monetary Colonialism With Open-Source Code,” France gets preferred treatment over any other nation looking to buy exports from African countries in the CFA system:

“The most surprising part, perhaps, is the special privilege of first right of refusal on imports and exports. If you are a Malian cotton producer, you must first offer your goods to France, before you go to the international markets. Or if you are in Benin and want to build a new infrastructure project, you must consider French bids, before others. This has historically meant that France has been able to access cheaper-than-market goods from its former colonies, and sell its own goods and services for higher-than-market prices.”

In theory, Bitcoin could provide a way out of such monetary colonialism. In selling its natural resources for BTC, the CAR could bypass the hurdles and bureaucracies intrinsic to the CFA system. It could be a first step toward a more sovereign nation in Central Africa.

Bitcoin Delegation Shares How CAR Could ‘Fix This’ With Bitcoin

The visit of the Bitcoin Delegation to the Central African Republic culminated in a report sent to the country’s officials earlier this month detailing the findings of the group as well as its recommendations for a better and more effective adoption of bitcoin. Bitcoin Magazine obtained a copy of the report.

Focus On Bitcoin

The first recommendation made by the delegation, as previously mentioned in the article, was for a sole focus on Bitcoin instead of embarking on adopting multiple cryptocurrencies simultaneously.

The Bitcoin Delegation argues that by choosing only Bitcoin, adoption would be facilitated across the country and citizens could rest assured that the rules governing their newly-acquired money would not change.

“Choosing a cryptocurrency whose rules will not change overnight, under the influence of a person, a foundation, or a political organization, is reassuring as a legal tender,” the report reads. “Such a scenario is conceivable for most other alt-coins, if not all, whose governance rests in the hands of one or more founders or a foundation. In reality, Bitcoin is the only crypto asset that doesn’t follow this rule.”

In truth, many crypto projects have suffered from quasi-decentralization to date. The Ethereum network, for one, in what became known as the DAO Hack, rolled back chain state after an exploit was discovered, resulting in a hard fork and the creation of Ethereum Classic.

Ethereum itself also had a premine — when coins are made available to select investors before being offered to the open market through mining — a reality that many cryptocurrencies endure today. It can hence be argued that only Bitcoin has had a fair distribution of coins, as Satoshi Nakamoto themselves earned their BTC through mining.

“Hundreds of crypto projects disappear every year when Bitcoin continues to prove its ability to withstand any test, thanks to its high level of decentralization,” the Bitcoin Delegation wrote. “Focusing on Bitcoin, and only Bitcoin, will help avoid all the pitfalls of the crypto industry, and will allow people to stay away from the thousands of fraudulent projects.”

“Not focusing on Bitcoin alone will slow the population's adoption process, or could even make it fail,” the delegation concludes.

Buying And Selling Bitcoin

In its second recommendation, the Bitcoin Delegation focused on an important aspect of bitcoin adoption: on- and off-ramps.

“Buying and selling bitcoin will be a decisive phase of widespread adoption,” the report states. “The user should not feel imprisoned by the currency and should be able to convert it into well-known cash quickly.”

In order to achieve this goal, the delegation suggests that the CAR plugs bitcoin into existing, popular payment models such as mobile credit retailers. According to the report, there are about 12,000 mobile credit retailers in the Central African country, which can be a powerful tool for an enhanced buying and selling experience for the population.

The delegation also recommended the deployment of Bitcoin ATMs in the country’s main cities, preferably in secure locations such as hotels.

Lightning Network

While the second suggestion by the delegation focused on ensuring an ability to exchange fiat money for bitcoin and vice versa, the third seeks to enable the usage of BTC for payments in and of itself.

The Bitcoin Delegation explained that Lightning, Bitcoin’s overlay network for cheap and fast payments, was the key technology that allowed El Salvador to feasibly utilize bitcoin for everyday transactions. Likewise, it is critical that the CAR adopts the network for a better usage experience.

“Lightning aims to enable fast transactions and solve Bitcoin's scaling problem by dramatically lowering transaction costs,” per the report. “The deployment of Lightning nodes within CAR will ensure the sovereignty of payments, and the uncensored use of the network.”

Bitcoin Mining

As citizens start to buy and sell bitcoin as well as use it for payments, the Bitcoin Delegation envisions a way for the country itself to start profiting from Bitcoin: mining.

“The Central African Republic has abundant sources of energy. According to our sources, the hydroelectric potential could create an installed capacity of 700 to 2,000 MW [megawatts],” the report states. “Several hydropower plant projects exist in the drawers at Bangui, but unfortunately, they have never come to fruition due to a lack of financing.”

The delegation argues that the country could leverage bitcoin mining “as a subsidy” to tap into that underexploited clean energy potential.

An engineering team of Gouspillou’s company will offer “full technical and strategic support” for the CAR to carry out such a bitcoin mining project. The report also calls on those interested in supporting the initiative to reach out to Gouspillou and find ways they could help.

Education

More importantly than having the tools to use is knowing how to use them. With that in mind, the fifth recommendation made by the Bitcoin Delegation surfaces the area of Bitcoin education.

“A considerable portion of the Central African population does not yet understand what bitcoin is and its merits as the country’s legal tender,” the report reads. “The success of the legalization of bitcoin cannot be achieved without the involvement of government, civil society and academia. For this to happen, it is essential to train the population to understand the added value of Bitcoin for the prosperity of the Central African Republic.”

The delegation recommended that CAR officials work together with the Bitcoin community to establish three educational programs in the country: government, civil society and university initiatives.

On the governmental side, the group suggested the launch of “an official awareness program among civil servants, companies and the population explaining the reasons for the adoption, its advantages and disadvantages, handling and usage of a bitcoin wallet.”

As for the civil society program, the delegation argued that facilitating the establishment and funding of non-profit organizations that seek to educate the population on Bitcoin could yield much value to the country. Moreover, the cohort recommended that a Bitcoin embassy be formed in the CAR’s capital to carry out workshops explaining the use of Bitcoin to the population and serve as a hub for Bitcoiners across the world looking to support the country’s efforts.

“This initiative can then be replicated across other cities,” the report adds. “We also recommend holding a one- to a two-day conference in Bangui to train the population and business owners. This conference should be available on social networks to allow people to get information for free.”

Finally, the Bitcoin Delegation suggested that universities with reasonable internet access should develop a program focused on Bitcoin and Lightning. The course could help train the youth to build and develop the economy of their own country, enable research and innovation, open new job opportunities, and avoid the brain drain of Central African youth.

Sango Wallet

Galoy offered to support the development of the Sango wallet, piggybacking off of its experience in empowering the adoption of bitcoin at Bitcoin Beach in El Salvador.

“At the heart of the plan, the wallet will be the key element to send and receive bitcoin, whether on-chain or Lightning; instantly convert bitcoin into CFA Franc, and vice versa, at the user's request; teach users through a paid learning feature to speed up adoption; implement a robust security system to prevent misuse or theft of money held in the wallet,” per the report.

Taxation

“Taxation is the main lever that public authorities benefit from to encourage the development of economic activity and adoption by the population,” the delegation wrote.

In the context of the adoption of bitcoin in the Central African Republic, the Bitcoin Delegation suggested that a clear and attractive tax system should be developed, as well as a reduction on the taxation on smartphones.

Government Bonds

In its eighth and final recommendation, the Bitcoin Delegation advocated for the issuance of government bonds on the Liquid Network, a Bitcoin sidechain that enables issuance of digital assets, similar to El Salvador’s Bitcoin Bonds.

“These bonds would help finance the construction of the region’s solar/hydro energy infrastructure and bitcoin mining,” per the report. “The mining infrastructure would also benefit the Central African Republic with a source of revenue.”

The delegation suggested that CAR officials meet with Mow, the architect of El Salvador’s Bitcoin bonds, to flesh out a plan.

The Road To Financial Freedom

Given the situation on the ground in the CAR, it is clear that much work needs to be done before the population can start benefiting from bitcoin adoption.

Infrastructure is desperately needed in the African nation, and as such, government officials and the private sector will need to join forces to create the conditions for the P2P monetary network to properly flourish.

Nevertheless, the CAR can begin experimenting with the technology right away to bypass decades-old exports limitations and attract foreign investment into the country. Its natural resources can be a powerful anchor on which officials can rely, seeking capital from abroad to nourish their land.

In truth, and as mentioned by the Bitcoin Delegation’s report, if the right strings are pulled Bitcoin can act as a backboning technology for these developments to occur. Bitcoin’s unique alignment of incentives through its network can bring different parties together as they each seek their own success. In this sense, Bitcoin can be a powerful tool to spark the light of transformation for the small nation — one block at a time.

Moreover, the Bitcoin Delegation’s playbook provides more than tips for the CAR; it puts forward a checklist that other communities and nations interested in financial freedom can leverage to use the P2P monetary network.

Similar to how Bitcoin Beach kickstarted the adoption of bitcoin in El Salvador, so can other grassroots developments around the world trigger more nation states recognizing the power of money outside of governmental control.

As sovereign nations such as the U.S. accrue the benefits of governing their own money, it is likely to be the low-income, underdeveloped countries that continue embracing Bitcoin — one after the other. And as that happens, the unfavored of today’s system could have a headstart in the next system, while developed countries will become the ones playing catch up.

Read more: https://bitcoinmagazine.com/culture/how-central-african-republic-can-find-freedom-with-bitcoin

Text source: Bitcoin Magazine: Bitcoin News, Articles, Charts,