In spring 2022, the Central African Republic (CAR) became the first African country to adopt Bitcoin (BTC) as legal tender.
The Central African Republic followed in El Salvador’s footsteps as the second country in the world to recognize Bitcoin in this way. El Salvador has since boasted surging tourism, a robust economy, and a healthy amount of free PR since it allowed its citizens to make everyday purchases using the seminal cryptocurrency.
The Central African Republic, a much less economically developed economy than its Central American counterpart, would hope to emulate El Salvador’s success. Despite the nation’s vast wealth in natural resources, the Central African Republic is plagued by economic mismanagement, meager private and foreign investment, and systemic governance problems.
It is one of the poorest countries on the world’s poorest continent and ranks at the bottom of the World Bank’s Human Development Index. To make matters worse, up to 85% of the country’s exports are held in French treasuries, while the currency of choice, the CFA franc, is heavily geared towards economic development in France. Consequently, using a neutral, open-source, and censorship-resistant currency system like Bitcoin could not only benefit the country, but also emancipate it.
President Bitcoiners
Similar to El Salvador, the CAR law would make Bitcoin “official money.” Of course, this decision was applauded by Bitcoin advocates around the world. Also, CAR President Faustin-Archange Touadéra, a mathematician and Bitcoin supporter on social media, seemed inclined to support the launch of the unique cryptocurrency. The pro-Bitcoin tweets sound like El Salvador’s laser-eyed President Nayib Bukele.
Mathematics is the #language of the universe. #Bitcoin is universal money.
— Faustin-Archange Touadera (@FA_Touadera) April 27, 2022
However, the celebrations and support for the country in the bitcoin community were short-lived as the country launched its own token project despite formal visits from pure bitcoin advocates – including Galoy Money. Just days after the bitcoin law went into effect, the country surprised the crypto community by announcing the creation of a crypto token called Sango. The population of 5 million would also benefit from a “crypto hub” in the capital, Bangui.
A francophone contingent of established bitcoiners attend CAR in May. Source: Twitter
Cointelegraph sat down in Senegal, West Africa, with Mamadou Moustapha Ly, the Central African engineer overseeing the development of Sango Coin, to ask about the development of the project. As a payments expert, Ly also runs fintech startup Kete Cash. Ly highlighted the creation of what he called a “token, not a currency” called Sango. Sango is the token that would accompany the country’s plans to make Bitcoin legal tender.
Cointelegraph Talks to Ly in Senegal.
First, Ly stressed that the Bitcoin Legal Tender Act clearly states that the country will adopt Bitcoin. Other cryptocurrencies or even Sango Coin are not mentioned. He painted a clear distinction between sango and bitcoin:
“The law states that the digital currency that is legal tender is bitcoin. We recognize this as our official currency. […] The Sango coin is a project for the state of Central African Republic.”
Sango Coin offers foreign investors attractive incentives including citizenship through investment and eventually a CAR passport and governance benefits. In a way, buying Sango is a way to acquire residency in the country without touching government-issued fiat currencies.
A symbolic effort
But why was that necessary? El Salvador hasn’t created a new token to support its Bitcoin adoption efforts – so why should the CAR?
To compare the two countries’ bitcoin adoption strategies, both countries have announced bitcoin as legal tender. From this point on, they differ from each other. In El Salvador, foreigners could initially buy a residence permit with an investment of 3 BTC, but this was then revoked. “e-residence” can be purchased in the CAR […] by locking a fixed security of SANGO Coins of $6000 for a period of 3 years.” Also, by using the crypto token, foreign investors can directly access the country’s strategic resources, explained Ly.
In order to benefit from El Salvador’s rapid development without touching Bitcoin, the Central American country has topped up volcanic bonds. The Vulkan or Bitcoin Bonds support the creation of a “Bitcoin City” and are backed by the government. In contrast, Sango is a cryptocurrency based on a blockchain backed by Bitcoin.
The now-defunct Luna Classic (LUNC) token was the last time a token used Bitcoin as a treasury. The token meltdown wiped billions of dollars out of the total crypto market cap and shook confidence in the industry. So why create a token? Why build a system subject to hacking or attacks by malicious actors? And why are you doing this despite the best interest of the bitcoin contingent to go down a pure bitcoin path?
Ly explained that Sango is a “government project”. The money raised from the sale of Sango Coin will be used to purchase Bitcoin, which can then be used to purchase the materials needed for development projects, as well as pay for labor and other expenses.
It is important to note the poor financial situation in the country. Reports continue to suggest that civil servants and government salaries are paid by its former colonial ruler, France, while the country is described as an “oppressed” economy, according to the Heritage Foundation’s 2022 Index of Economic Freedom.
While bitcoin proponents hail the adoption of bitcoin as a panacea for most modern problems, the priorities in Central African Republic are clean water, safety, education, and then maybe internet connectivity. Given these motivations, the country needs investment — and it needs it fast.
The African Franc.
At this point, Ly pointed out that the Central African Republic’s high level of external debt makes access to traditional forms of financing more difficult. Sango Coin could be this alternative funding source. In fact, one could conclude that the quick liquidity provided by Sango is a way to bring much-needed foreign direct investment (FDI) to the country.
See also: “We Don’t Like Our Money”: The Story of CFA and Bitcoin in Africa
In addition, using a crypto token allows for greater flexibility and speed in conducting financial transactions, as well as reducing the risk of fraud, he commented. In a way, using sango could circumvent the bureaucracy and slow administrative practices that Central African governments are known for. Also, it could allow investment flows into the country without touching the dollar or the local currency.
When asked why Central African Republic doesn’t just use Bitcoin or the super-fast Lightning Network for these purposes, Ly reiterated that Sango Coin is intended to serve as a token related to the government project: “It’s not a general-purpose currency.”
Sango could allow better control over cash flow, thereby reducing the risk of capital flight. Furthermore, the World Bank points out that the country cannot develop its human capital without sustainably strengthening domestic revenue mobilization. Sango could be the quickest route to more robust earnings.
Bitcoin on the ground
Paco De La India, known as “Run with Bitcoin,” recently spent two weeks in the Central African Republic hoping to spend Bitcoin and interact with Bitcoin folks. He told Cointelegraph:
“There wasn’t even a single company that accepted bitcoin. I tipped my guide in bitcoin. I paid my host in bitcoin.”
Aside from these small successes, Paco told Cointelegraph that local adoption of Bitcoin is minimal. In a country where less than a quarter of the country has access to the internet – a prerequisite for using “magic internet money” – this is hardly surprising.
As for the creation of Sango Coin, Paco suggested that external forces could be at play. The CAR is extremely rich in resources, so why couldn’t a French government project get involved in the creation of the token? asked he. The token was actually created quickly after state visits to one of the world’s crypto hubs, Dubai.
Ly explained that foreign influences had 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 a deal was struck with foreign investors, but there was no indication that the former colonial power could use Sango Coin to control resources. It might just be the quickest way to raise capital and, as Ly has suggested, use that capital to buy Bitcoin and build the country’s infrastructure.
Ultimately, the adoption of Bitcoin and the creation of Sango appear to be a ploy to bring much-needed foreign direct investment to the country and improve the country’s standing globally. However, the creation of this token may shun the interest of the broader bitcoin community, arguably frontline investors in places and jurisdictions announcing their plans for bitcoin.
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