The Cameroon-headquartered Bank of Central African States (BEAC) has urged the Central African Republic (CAR) to repeal a law passed in late April that made the cryptocurrency bitcoin legal tender. The bank warned in a letter made public last week that the move violated its rules and could affect monetary stability in the region.
BEAC said CAR’s decision to make bitcoin legal tender could compete with the Central African franc (CFA), the region’s France-backed currency.
A letter dated April 29 by the bank’s governor to the finance minister of CAR and made public last week, said the move shows that CAR seeks a currency beyond the bank’s control.
The regional bank’s letter suggested that cryptocurrency use could disturb monetary stability in the six-member Central African Economic and Monetary Community (CEMAC).
CEMAC members, including CAR, Cameroon, Chad, Gabon, Equatorial Guinea and the Republic of the Congo, use the CFA franc as currency.
The Bank urged the CAR to follow CEMAC to promote economic and financial cooperation and avoid monetary volatility policies.
But economists say the cryptocurrency is growing in popularity and is difficult to control.
Financial capital economist Willy Delorte Hubo said bitcoin transactions in the region have quadrupled in the past three years.
He added that CAR’s decision to adopt bitcoin as legal tender is in violation of a Community Agreement signed by six member states (CEMAC) to protect the financial integrity and economic development of the economic bloc. However, Hubo said that despite the region’s policies against making bitcoin legal tender, it is very difficult to stop cryptocurrency transactions when people agree to use it as a means of payment.
BEAC also expressed concerns that cryptocurrencies could make it easier for criminals to launder money and sponsor terrorism or insurgency in the region.
The CAR has been in conflict between insurgents and central authorities since 2013. Cameroon is fighting separatists, and Chad is fighting a spreading Islamist insurgency.
Last week, Cameroon’s Employers’ Association said armed groups in Central African countries use bitcoin to hide their financial transactions. The union said that in 2021 Cameroon reported bitcoin transactions worth $260 million – 40% of them to separatists in the western regions.
The central African bank said that instead of adopting bitcoin, CAR should implement CEMAC monetary policies to reduce endemic poverty.
CEMAC economist and consultant David Kunde said that if CAR does not repeal the law on bitcoin, the bank could penalize it.
He said that when CAR or any of the CEMAC member states want to buy from the international market, they run to the Bank of Central African States for liquidity for their transactions. Kunde said the bank can freeze the reserves of CAR if it violates the laws of the economic block.
BEAC declined to respond to a reporter’s questions about what pressure the CAR could use to repeal the bitcoin law.
The Central African Franc (CFA) was linked to the French franc in 1948 following agreements between Cameroon, Chad, the Central African Republic, Equatorial Guinea, Gabon and the Republic of Congo.
CEMAC member states agreed to keep at least half of their financial reserves in the French treasury in exchange for convertibility guarantees.
Since 1999, the CFA franc has been pegged to the euro from approximately 660 CFA francs to one euro.
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