first El Salvador and now Central Africa

First it was El Salvador and now it is the Central African Republic (CAR) that is in the sights of the International Monetary Fund (IMF) for its recent adoption of bitcoin (BTC) as legal tender.

For the IMF, the adoption of bitcoin “poses important legal, transparency and economic policy challenges,” according to Bloomberg, citing the answers given by spokespersons of the international organization when consulted on the issue.

In that regard, he indicated that an IMF working group is “helping” regional authorities, and those of the Central African Republic itself, to know and handle first-hand the doubts that could be generated by the new law.

On April 21, the National Assembly of the African country unanimously approved a bill that it regulates the use of bitcoin on its territory, giving the pioneer cryptocurrency the status of legal currency.

Days before the enactment of the law, the IMF had prepared a report in which it projected a growth of 3.5% in the Central African economy during this year and 3.7% in 2023, but also an increase in inflation due to the rise in food and fuel prices.

The report was released on April 27, shortly after the country passed the regulation on cryptocurrencies. So it remains to wait for the next assessment that the IMF will make with the presence of bitcoin in the CAR. Warnings similar to those made for El Salvador could be expected.

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In that sense, when the Central American country adopted cryptocurrency last year, the body projected a negative outlook for that nation.

Among other things, the IMF assured that the public debt of El Salvador would rise to around 96% of GDP in 2026, something he considers an “unsustainable trajectory”. He also predicted a fiscal deficit of 5% of GDP for this year, as reported by Criptonews.

In addition, the IMF issued several statements suggesting that the adoption of bitcoin in El Salvador represents risks to financial stability in the country. These warnings were rejected by the government pointing out that bitcoin is not leaving El Salvador. “No international body is going to force us to do anything, nothing at all,” Finance Minister Alejandro Zelaya said.

Challenges for the adoption of bitcoin in the RCA

Adopting a cryptocurrency does not mean that there will be immediate prosperity or improvements in the situation of a country by magic. In addition, the situation of the CAR is different from that of El Salvador.

In the case of the African country, the challenges are considerably broader, if we take into account that it is rated as one of the least developed countries in the world. According to data from Amnesty International, 2.29 million people, that is, almost half of its population, are in a condition of “acute food insecurity”.

On the other hand, there is the issue of technological infrastructure, a vital area for bitcoin and cryptocurrencies. Statistics from 2020 show that there are 1.60 million mobile phones in the country, which corresponds to an average of 0.34 per person.

This is equivalent to less than 8% of the entire population of the republic, which would mean that more than 90% of its inhabitants would not have the possibility to use bitcoin as a payment method.

Something that also causes concern to the IMF is the area of security. With a fairly young democracy, its first elections were held in 1993. The country has gone through two civil wars. Currently, President Touadéra has launched the dialogue initiative together with the Luanda road map led by neighboring countries.