The Central African Republic (CAR) presents an initiative for a “crypto hub”. The plan seems far-reaching and ambitious - and contains geopolitical explosives. Is crypto helping the poor country break free from the monetary arrears of colonialism? Or does it only serve the president to barter away his country's rich raw materials? And what role does the World Bank play in this?
Sango is actually the word for the national and official language of the Central African Republic (CAR). For a few days, however, Sango has also been the title of the crypto initiative of the desperately poor country in central Africa.
President Faustin-Archange Touadera recently announced the initiative. The government is launching, he writes on Facebook , “the first legal crypto hub in the heart of Africa”. This goes, he added on Twitter, "beyond politics and administration and has the potential to redesign ZAR's financial system."
Which, to anticipate a little, is no exaggeration.
On the sango.org website, a presentation presents the crypto initiative on 24 slides. Although it mostly remains keyword-like and vague, it is impressive overall with its enormous ambition. The country is getting into “crypto” in a very remarkable way. It wants to pull out all the stops in the market — bitcoin, altcoins, tokens, ICOs, the Metaverse, NFTs — and it plans to attack Central Africa’s monetary order by doing so.
Maybe that's an overstatement. But maybe Sango will be the start of a long-needed currency war in the center of the continent
Goals and Basics
First, an overview of the initiative. It has three goals:
1.) Pull up the Krypto Hub. This is intended to “welcome companies and attract crypto enthusiasts worldwide.” The location is to become attractive through a legal framework, digitized administration, tax exemptions and public-private partnerships.
2.) “Taking Bitcoin to the Next Level”: The country will create the first-ever digital central bank, and it will sell land and natural resources for Bitcoin.
3.) Create the "Crypto Island". The so-called "crypto economic zone" is both a real country and a virtual metaverse in which NFTs depict goods and privileges.
That is the plan, and for this the country is looking for partners who can develop wallets or a framework for tokenization, crowdfunding and NFTs, for example.
All of this is made possible by the crypto law passed on April 21 . The further legal framework is to be created by the end of 2022.
The World Bank pays for it
The presentation also mentions a $35 million loan that the World Bank granted to the country on May 5. Through him, the government presumably pays for the development of the crypto hub.
In the announcement , the World Bank praised Central African Republic's progress in digitizing finance. In order to "scale these reforms" it makes more loans. The partnership with the state has the central goal of "improving public financial management, transparency and efficiency" as well as "creating new job opportunities for young people".
With the crypto hub, one would think, the Central African Republic is doing just that. Nothing is more transparent and efficient than crypto, and nothing attracts the ambitious youngsters more than coins, tokens and NFTs. When the media murmured after the loan was issued that the World Bank was funding a crypto project for the first time, the body made it clear that the loan had nothing to do with it. On the contrary: you are observing the project with concern and skepticism.
"We have concerns about transparency, as well as the potential implications for financial inclusion, the financial sector and public finances in general, as well as environmental deficiencies," the World Bank told Bloomberg .
On the way to the perfect tax haven?
However, the government is not lying when it announces that it will digitize public administration. Blockchain and crypto should play a key role in this.
Thinking about the plans presented in the presentation, it becomes difficult to decide: is the mathematician Touadera emancipating his country through a bold, brilliant move? Is Crypto Law the Biggest Opportunity ZAR Has Had in Decades? Is a new path of economic development emerging?
Or is the President abusing the World Bank loan? Is he driving the sell-off of resources with the crypto hub? Does he sell land and resources abroad for a few coins? Is he stuffing the already scarce state assets down the throats of foreign speculators? Or does he play the popular bullshit bingo of the crypto rip-offs to relieve speculators worldwide of a few coins?
Somewhere between the extremes lies the variant that the ZAR offers itself to international investors and companies. The Central African Republic is planning, to put it somewhat polemically, to set itself up as a tax haven, and crypto is a welcome tool for that.
Given the economic status, that wouldn't be the worst option.
With tokens to a public-private partnership
The projects of digitization are far-reaching: Both identity and ownership claims are to be digitized; all offices shall recognize these titles. Companies will be registered online, there will be e-residency, based on the Estonian model, and those who invest will receive citizenship.
This should become the legal framework that is to be created by the end of the year. He could make it easy to set up a business in CAR without ever having set foot in the country.
As a reward, full tax exemptions on income, business, and crypto trading profits lure. Presumably this only applies to crypto companies, possibly only in the Crypto Island crypto economic zone.
Token, Token, Token
In addition, the government wants to use tokens and crypto crowdfunding for itself. She would like to finance public-private partnerships with them.
You might think of it this way: companies receive tokens that represent shares or profits in infrastructure projects they are involved in, perhaps toll income from a road or handling fees from a port. There may be ICOs to fund such projects. As the ICO is by far the most powerful capital raising vehicle that has ever existed, this could be exciting.
Another type of planned token might be even more attractive to foreign entrepreneurs: a commodity and real estate token that the government will sell for Bitcoin.
And that brings us to geopolitics.
Tokenize resources
The Central African Republic has rich natural resources. The presentation mentions gold, diamonds, uranium, iron ore, copper, coltan (from which tantalum is derived), cobalt, nickel, lithium and petroleum. The German Energy Agency also names graphite, ilmenite, kaolin, kyanite, lignite, manganese, quartz, rutile, salt and tin.
However, most of these resources have not yet been developed. Mining is mainly limited to gold and diamonds.
The country is sitting on an unscathed treasure that is more valuable than ever in the current world situation. It is rich in raw materials without mining them so far; and for the commodities it extracts, diamonds in particular, it does so under outrageous circumstances , usually with no benefit to the populace.
One of the reasons for this is the widespread corruption and a very centralized market in which a large number of small entrepreneurs mine raw materials, but very few wholesalers sell them.
So far, the ZAR has not been able to use its wealth of raw materials to raise the standard of living. In the list of gross national product per capita adjusted for purchasing power , the country is in 226th place out of 228. Of course, this is not only due to post-colonial economic problems, but also to the civil wars that plagued the country until Touadera’s first presidency in 2016.
With the Crypto Initiative, the government now wants to allow foreign entrepreneurs and investors to buy commodities tokenized with Bitcoin that are still in the ground. Crypto whales get the opportunity to buy an undeveloped copper or coltan mine in the heart of Africa and store it as a token in Metamask.
Of course, one could now suspect the government of wanting to misuse crypto to sell the country's commodities abroad. Cryptocurrencies and tokens definitely make it easier to sell resources.
However, the status quo is so bad that there is not much to lose but a great deal to gain. The crypto hub could help tap into the commodity wealth. It could decentralize, internationalize and boost trade. He could help build infrastructure, with roads, ports, planes, rails.
It could thus become a blueprint for other countries in a similar situation.
A digital central bank
In addition to opening up to investors, the crypto initiative also has a very special geopolitical component: the country wants to found a digital national bank, the "Banque National Digitale de la Republique Centrafricaine" (BNDRC).
The ZAR thus challenges the post-colonial monetary order. Because the country itself does not even have its own central bank. Instead, the Cameroon-based Bank of Central African States (BEAC) issues the CFA franc, which is legal tender in CAR, Cameroon, Chad, Republic of the Congo, Equatorial Guinea and Gabon.
The BEAC is for the countries of Central Africa something similar to what the European Central Bank (ECB) is for the euro states. In practical terms, the BEAC is a department of the ECB, as its monetary policy also flows into the CFA, which is pegged to the euro at a ratio of 1:100.
Depending on how you read it, the CFA franc creates monetary stability in an unstable region because it ties its value to the euro – or it establishes economic dependence on France that will last beyond the end of colonialism.
"A middle finger for the French economic system"
According to the Financial Times , Hippolyte Fofack, chief economist at the African Export-Import Bank, complains that the CFA franc is keeping currencies in Africa artificially high. This helps foreign companies to siphon off profits and local elites to go shopping in European capitals. However, it prevents industrialization because export prices are not competitive.
Fofack hails Central African Republic's bitcoin law as a remedy against CFA franc dominance. The CEO of Yellow Card, an African crypto exchange, also calls the law “a fat middle finger stretched out for the French economic system.”
However, the Financial Times fears that this turning away from France will invite other powers. About Russia. President Toudera is accused of using mercenaries from the notorious Russian Wagner Group to suppress rebel groups. It is to be feared that the crypto law will help Russia to deepen its influence on the country, and somehow the Ukraine war is also trickling down into the heart of Africa.
The BEAC strikes back
Naturally, BEAC, the Bank of Central African States, is not very happy about ZAR’s crypto ambitions. Its governor, Abbas Mahamat Tolli , stated that the crypto law violates ZAR's membership regulations of the Central African Economic and Monetary Union and thus international treaties.
The law suggests “that its primary goal is to create a Central African currency that is beyond the control of BEAC; likely to replace or supplement legal tender and thereby endanger monetary stability.”
What the BEAC actually thinks of the state sovereignty of its members is made more than clear by another piece of news: On May 6, the central bank-based Banking Commission of Central Africa (COBAC) categorically banned cryptocurrencies from the CEMAC zone (Cameroon, ZAR, Congo, Gabon, Guinea) prohibited . Both holding and paying with cryptocurrencies are illegal, as is exchanging or managing them.
Shortly thereafter, to lend force to the ban, BEAC ruled that lenders should no longer work with payment platforms that process cryptocurrency transfers or even recognize them as an asset. The lenders must also ensure that there are no indirect attempts to make crypto payments. According to Abbas Mahamat Tolli, this is important in order to maintain financial stability.
A currency war is brewing in Central Africa. And Bitcoin is not just in the middle – Bitcoin makes it possible in the first place.
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