The Cameroon-headquartered Bank of Central African States (BEAC) has urged the Central African Republic (CAR) to annul a law it passed in late April that made the cryptocurrency Bitcoin legal tender. The bank warned in a letter made public last week that the move breached its rules and could affect monetary stability in the region.
BEAC said the CAR’s decision to make Bitcoin legal tender could compete with the Central African Franc (CFA), the region’s France-backed currency.
A letter from the bank’s governor to the CAR’s finance minister dated April 29, and made public last week, said the move suggests the CAR wants a currency beyond the bank’s control.
The regional bank’s letter goes on to suggest using the cryptocurrency could upset monetary stability in the six-member Central African Economic and Monetary Community (CEMAC).
CEMAC members, including the CAR, Cameroon, Chad, Gabon, Equatorial Guinea, and the Republic of Congo, use the CFA Franc as currency.
The bank urged the CAR to comply with CEMAC in promoting economic and financial cooperation and avoiding policies that may lead to monetary fluctuations.
But economists note cryptocurrency is growing in popularity and difficult to control.
Financial Capital economist Willy Delort Heubo said Bitcoin transactions have quadrupled in the region in the past three years.
He said the decision by the CAR to adopt Bitcoin as legal tender is a violation of a community pact signed by the six member states of (CEMAC) to protect the economic block’s financial integrity and economic development. However, Heubo said 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.
The BEAC has also expressed concern that cryptocurrencies could make it easier for criminals to launder money and sponsor terrorism or rebellions in the region.
The CAR has been in conflict between rebels and central authorities since 2013. Cameroon is fighting separatists, and Chad is fighting a spreading Islamist insurgency.
Last week, Cameroon’s Employers Union said armed groups in central African countries use Bitcoin to hide their financial transactions. The union said Cameroon in 2021 reported Bitcoin transactions of $260 million – 40% of them to separatists in western regions.
The central African bank said instead of adopting Bitcoin, the CAR should implement CEMAC monetary policies to reduce endemic poverty.
CEMAC economist and consultant David Kunde said if the CAR does not annul the law on Bitcoin, the bank could punish it.
He said when the CAR or any CEMAC member states want to buy from the international market, they rush to the Bank of Central African States for liquidity for their transactions. Kunde said the Bank could withhold the CAR’s reserves if it violates the economic bloc’s laws.
The BEAC declined to answer questions from a reporter on what pressure it might use to get the CAR to annul the Bitcoin law.
The Central African franc (CFA) was pegged to the French franc following agreements signed between Cameroon, Chad, the Central African Republic, Equatorial Guinea, Gabon, and the Republic of Congo in 1948.
The CEMAC member states agreed to keep at least half of their financial reserves in the French treasury in return for a convertibility guarantee.
Since 1999, the CFA franc has been pegged to the Euro at about 660 CFA francs to one Euro.