IMF Warns Central African Republic Against Bitcoin Adoption

The government claims that allowing Bitcoin to be used as legal tender will help the Central African Republic’s economic recovery.

By Shomik Sen Bhattacharjee | Updated: 5 May 2022 18:33 IST

IMF Warns Central African Republic Against Bitcoin Adoption

Photo Credit: Unsplash/ Kanchanara

Central African Republic believes Bitcoin legalisation will aid growth

Highlights

CAR adopted BTC as legal tender last week
Bitcoin has been criticised for being used to launder money
IMF has issued warnings on similar grounds to El Salvador too

The International Monetary Fund (IMF) has stated that the adoption of Bitcoin as legal tender by the Central African Republic presents a number of challenges. The global authority expressed the same concerns that it did when El Salvador adopted Bitcoin, namely macroeconomic and legal worries. Ranking among the poorest nations in the world, the nation last week became the second to adopt cryptocurrency after El Salvador. The Central African Republic is the first African nation to accept Bitcoin as legal tender.

The IMF, which works to promote sustainable growth and sound monetary policy for member states, told Bloomberg today that the CAR's adoption of Bitcoin as legal tender raises major legal, transparency, and economic policy challenges.

Like other countries and companies getting more involved with crypto, the Central African Republic believes that adopting Bitcoin as legal tender will help its struggling economy. This may be the start of a new wave of countries accepting Bitcoin as legal tender. Developing countries, in particular, stand to gain from the asset class, as it can help digitize economies and foster innovation, especially in countries with large unbanked populations heavily reliant on remittances.

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According to WorldData, in 2019, only 4 percent of people in CAR had access to the internet while CFA Franc, along with most other former French colonies in Africa, is currently the currency of the country.

The Central African Republic's government said the adoption of Bitcoin will spur the economy's recovery and growth, as well as help stabilise the country, which has been ravaged by a decade-long civil war.

Last week, CAR President Faustin Archange Touadera signed a law legalising cryptocurrencies and making Bitcoin a legally recognized currency in the country following a unanimous parliamentary vote. CAR officials also said the nation is moving forward with broad-based crypto adoption plans.

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The IMF also took issue with El Salvador's decision to adopt Bitcoin as legal tender. The fund's executive board urged the country to remove the cryptocurrency's legal tender status in January of this year, citing "large risks associated with the use of Bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities."

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