Central African Republic's 'Crypto Island': Visionary, or a scam?

Hi, Tech54 readers!

Cryptocurrencies have had a rough ride recently. Bitcoin has fallen from highs of $47,454 in late March to just $19,716 at time of going to press. But despite the collapse, one little-known African country is putting its faith in alternative currencies. Having controversially announced its official adoption of bitcoin in May, the impoverished nation has announced plans to launch its own cryptocurrency - Sango Coin. The country's plans have provoked widespread scepticism among analysts. And as Leo Komminoth writes in this week's Tech54, the story of the CAR's 'Crypto Island' is even stranger than fiction. Enjoy!

- David Thomas, editor, African Business 

Central African Republic’s ‘Crypto Island’ scheme provokes scepticism

With the launch of Sango Coin, the CAR has taken a further step in implementing a crypto-based financial system, but there is little chance the president’s drive to introduce virtual currencies will benefit the population.

Two months after adopting bitcoin as an official currency, the Central African Republic (CAR) has officially launched Sango Coin, a controversial cryptocurrency, and announced plans to launch Africa’s first zero-tax crypto-hub.

“Sango will be the new generation currency of the Central African Republic,” said President Faustin-Archange Touadéra during a virtual government event held on 3 July.

It is not clear how Sango Coin will work alongside the country’s official adoption of bitcoin, which was announced in May, a move which attracted widespread scepticism from experts given that internet adoption in the country – one of the poorest in the world – is only around 10%.

But according to Touadéra, Sango Coin will allow the country to exploit its untapped natural resources by facilitating investment through decentralised platforms and avoid the restrictions of the international financial system. He also claimed that the cryptocurrency will help to overcome structural problems which prevent access to basic financial services. The president said that 52% of its population do not have access to a bank account.

“The smartphone is the alternative to traditional banking, cash and financial bureaucracy,” President Touadéra says.

Touadéra says that the new tax-free crypto hub will be “the catalyst for the tokenisation of vast natural resources”, attracting crypto-rich investors around the world to invest in the CAR’s untapped minerals.

The project will also involve the launch of “Crypto Island”. This is intended to be a metaverse platform where virtual palaces, casinos, a large stadium, and a water park will be built, backed up by real physical property in Bangui, capital of the CAR.

Earlier this year, the CAR became the first African country to adopt bitcoin as legal tender, and second in the world after El Salvador, raising concerns among international institutions.

The IMF said that CAR’s adoption of bitcoin as an official currency “raises major legal, transparency, and economic policy challenges”.

The Bank of Central African States (BEAC), whose role is to enforce monetary policies in the six-member Central African Economic and Monetary Community, said that the CAR’s move on cryptocurrency is a threat to the stability of its common currency and prohibited its use within the bloc. But Touadaré believes Sango – named after the official language of the CAR – is an opportunity to free the country from binding rules of financial institutions, and tap the potential of the informal economy.

“The cash alternative is cryptocurrency. For us, a formal economy is no longer an option,” he said.

People of CAR ‘will not see many improvements’

However, experts fear that the CAR’s enthusiasm for bitcoin could be a smokescreen for dubious economic activities. The BEAC has expressed concern that cryptocurrencies could make it easier for criminals to launder money.

The construction of a “crypto island”, says David Gerard, an independent technology journalist, is likely to resemble “special economic zones, where whoever the richest people are make the laws.”

“If this scheme is going forward, outside people will take control of the resources, make all the money, and the people of CAR will not see many improvements, except for the ones at the top,” says Gerard.

“Technology is not involved. It’s all about the financial instrument and business deals. It is about people and flows of cash. Technology does not do magic, and certainly does not make the money flow differently,” he says.

Some have speculated that Russia’s close interests in the CAR – which include the government-approved deployment of the Wagner Group of military contractors – could be served by the adoption of cryptocurrencies.

“Russia has been trying to extend its influence in Africa a lot and wants African countries to back its position on Ukraine and it would pay people to do that,” says Gerard.

- Leo Komminoth