In the spring of 2022, the Central African Republic (CAR) will become the first African country to adopt Bitcoin (BTC) as legal tender.
As the second country in the world to recognize Bitcoin in such a way, CAR is following in the footsteps of El Salvador. El Salvador has since boasted rising tourism numbers, a resilient economy and a healthy amount of free PR since allowing its citizens to make daily purchases with the seminal cryptocurrency.
CAR, an economically less developed economy than its Central American counterpart, hopes to emulate El Salvador’s success. Despite the country’s vast wealth of natural resources, CAR is plagued by economic mismanagement, low private and foreign investment, and systemic government problems.
The country is one of the poorest countries in the world’s poorest continent, ranking lowest on the World Bank’s Human Development Index. To make matters worse, until 85% the country’s exports are deposited in French treasuries, while its currency of choice, the CFA franc, is heavily biased towards economic development in France. Consequently, tapping into a neutral, open-source and censorship-resistant monetary system such as Bitcoin can not only benefit but emancipate the state.
President of Bitcoiners
Same as El Salvador, CAR the law will make Bitcoin “official money.” Naturally, this decision was praised by Bitcoin supporters around the world. In addition, it appears that CAR President Faustin-Archange Touadéra, a mathematician and Bitcoin supporter on social media, is inclined to support the adoption of the unique cryptocurrency. Pro-Bitcoin tweets mention the president of El Salvador, Nayib Bukele.
That’s math #language from the Universe.#Bitcoin it is universal money.
– Faustin-Archange Touadera (@FA_Touadera) April 27, 2022
However, the celebration and support for the country among the Bitcoin community were short-lived as, despite the official visit by supporters of Bitcoin-only – including Galoy Money – the country started its own token project. Just a few days after the Bitcoin law came into effect, the country shocked the crypto community declare created a crypto token called Sango. A population of 5 million will also benefit from a “crypto hub” in the capital, Bangui.
Cointelegraph sat down in Senegal, West Africa with Mamadou Moustapha Ly, the Central African technician overseeing the development of Sango Coin, to ask about the development of the project. A payment expert, Ly also runs fintech startup Kete Cash. Ly shed light on the creation of what he calls “tokens, not currencies,” labeled Sango. Sango is a token that will accompany the country’s plan to use Bitcoin as legal tender.
First, Ly emphasized that the Bitcoin-as-legal-tender law clearly states that the country will use Bitcoin. There is no mention of other cryptocurrencies or even Sango Coin. He made a clear division between Sango and Bitcoin:
“The law states that the legal digital currency is Bitcoin. We recognize it as the official currency. […] Sango Coin is a project for the Central African Republic country.
Sango Coin offers attractive incentives for foreign investors, including citizenship by investment and eventually a CAR passport, as well as governance advantages. In a sense, buying Sango is a way to buy residency in the country, without touching government-issued fiat currency.
A token effort
But why is this necessary? El Salvador is not creating a new token to support Bitcoin adoption efforts – so, why CAR?
To compare the two countries’ Bitcoin adoption strategies, both countries declared Bitcoin as legal tender. From that point on, they diverged. In El Salvador, foreigners were first able to buy residency with an investment of 3 BTC, although it was later revoked. In CAR, “e-residency can be obtained […] by locking a fixed guarantee of SANGO Coin in the amount of $6000 for a period of 3 years. In addition, foreign investors can directly access the country’s strategic resources through the use of crypto tokens, Ly explained.
To gain exposure to El Salvador’s rapid development without touching Bitcoin, the Central American country created a volcano bond. Volcano bonds or Bitcoin supports the creation of “Bitcoin City” and is backstopped by the government. In contrast, Sango is a cryptocurrency built on a blockchain “powered by Bitcoin.”
The now defunct Luna Classic token (LUNC) was the last time a token used Bitcoin as a treasury. The token’s weakness wiped billions of dollars off the total crypto market cap and undermined confidence in the industry. So why create tokens? Why build a system that is liable to hacking or attacks from bad actors? And why do it despite the Bitcoin contingent’s best interest to steer the Bitcoin-only path?
Ly explained that Sango is a “government project.” The money raised through the sale of Sango Coins will be used to buy Bitcoins, which can then be used to obtain materials needed for development projects, as well as to pay for labor and other costs.
It is important to note the dire financial situation of the country. Reports continue to show that the salaries of civil servants and the government are being paid by the former occupier, France, while the country is called economically “oppressed” according to the Heritage Foundation’s 2022 Index of Economic Freedom.
While Bitcoin supporters advocate the adoption of Bitcoin as a panacea for most modern problems, in CAR, the priorities are clean water, security, education and then maybe internet connectivity. With that motivation, the country needs investment – fast.
Until recently, Ly noted that the Central African Republic’s high level of external debt made it difficult for the country to access traditional forms of financing. Sango Coin can be an alternative funding source. Indeed, it can be concluded that the quick liquidity provided by Sango is the way to initiate the much needed foreign direct investment (FDI) into the country.
Related: ‘We don’t like money’: The story of CFA and Bitcoin in Africa
In addition, the use of crypto tokens allows greater flexibility and speed in carrying out financial transactions, as well as reducing the risk of fraud, he said. In a sense, the use of Sango avoids the bureaucracy and slow administrative practices that Central African governments are known for. In addition, it can allow investment to flow into the country without touching the dollar or the local currency.
When asked why the Central African Republic doesn’t just use Bitcoin or the fastest Lightning Network for that purpose, Ly stated that Sango Coin is meant to be a token related to government projects: “It’s not a general purpose currency.”
Sango can allow greater control over the flow of funds, therefore reducing the risk of capital flight. In addition, the World Bank states that the country will not be able to develop human capital without strengthening domestic revenue mobilization in a sustainable manner. Sango can be the fastest way to a more stable income.
Bitcoin is underground
Paco De La India, known as “Run with Bitcoin,” recently spent two weeks traveling in CAR in hopes of spending Bitcoins and interacting with Bitcoin people. He told Cointelegraph:
“Not a single business accepts Bitcoin. I tip my guide in Bitcoin. I pay my host in Bitcoin.
With that small success, Paco told Cointelegraph that the underground adoption of Bitcoin is minimal. In a country where less than a quarter of the country has access to the internet — a basic requirement to use the “magic internet money” — it is not surprising.
For the creation of Sango Coin, Paco suggests that there are external forces at play. CAR is very rich in resources, so why can’t the French state project intervene with the creation of these tokens? he asked. The token was created very quickly after the country’s visit to one of the world’s crypto centers, Dubai.
Ly explains that foreign influences have an impact on the decision-making process:
“The idea for Sango Coin came from a private partner based in Dubai who discussed it with the Head of State.”
And deals with foreign investors, but there is no suggestion that the former colonial power can use Sango Coin to control resources. It may be the fastest way to raise capital and, as Ly suggests, use this capital to buy Bitcoins and build the country’s infrastructure.
Ultimately, the adoption of Bitcoin and the creation of Sango is seen as a ploy to inject much-needed FDI into the country and improve the country’s standing globally. However, the creation of these tokens could avoid the interest of the wider Bitcoin community, perhaps front-line investors to the places and jurisdictions that have announced plans for Bitcoin.