Central African Republic just approved Bitcoin as an official currency. El Salvador’s experience shows it may be a bumpy ride
The Central African Republic has become the second country in the world to approve Bitcoin as an official currency, following El Salvador’s bumpy rollout of the cryptocurrency last year.
A spokesperson for Central African Republic President Faustin-Archange Touadéra told Reuters on Thursday that adopting Bitcoin would improve conditions for the country’s population.
The Central African Republic is one of the poorest countries in the world, despite being rich in both gold and diamonds, and the nation has been troubled by unrest for years, according to the UN.
Bitcoin was trading at $39,698 on Wednesday, according to CoinDesk—a far cry from its peak of more than $67,000 in November 2021.
Lessons from El Salvador
The Central African Republic is following in the footsteps of El Salvador by approving Bitcoin as legal tender.
El Salvador was the first country to adopt the cryptocurrency as an official currency when it made the move in September, with the government creating Bitcoin wallets for citizens called Chivo.
However, El Salvador’s decision to adopt Bitcoin—which is a notoriously volatile asset—has been dubbed a huge economic risk, with the policy failing to capture support among the country’s population.
In January, the International Monetary Fund urged the government of El Salvador to remove Bitcoin’s legal tender status, which the organization said “entails large risks for financial and market integrity, financial stability, and consumer protection.”
But El Salvador pushed back against the IMF’s recommendation. Finance Minister Alejandro Zelaya later told a local broadcaster that the use of Bitcoin was a matter of sovereignty, and that “no international organization is going to make us do anything at all,” according to the Associated Press.
Despite its official defiance, the rollout in El Salvador has been anything but smooth over the past few months.
Soon after Bitcoin’s adoption, a survey by the El Salvador Chamber of Commerce found that over 80% of people didn’t want remittances in Bitcoin—perhaps because of astronomically high ATM fees on converting Bitcoin to U.S. dollars—and over nine in 10 rejected the idea of taking their salaries in digital coins.
In March, El Salvador President Nayib Bukele’s initiative to roll out a “volcano bond”—named for a plan to spend half the bond’s proceeds on a new “Bitcoin city” at the foot of El Salvador’s Conchagua volcano—was met with investor skepticism.
This week, a new report from the U.S. National Bureau of Economic Research found that just 20% of adult citizens in El Salvador were using the Chivo Wallet app. It also found that after spending a preloaded $30 bonus, more than 60% of Salvadorans stopped using Chivo.