In the spring of 2022, the Central African Republic (CAR) became the first African country to accept Bitcoin (BTC) as legal tender.
CAR has followed in the footsteps of El Salvador as the second country globally to recognize Bitcoin in such a way. El Salvador has since boasted growing tourism numbers, a sustainable economy and a healthy free PR as it allows its citizens to make daily purchases with the major cryptocurrency.
A less economically developed economy than its Central American counterpart, CAR would hope to emulate El Salvador’s success. Despite the country’s vast natural resource wealth, CAR faces economic mismanagement, scant private and foreign investment, and systemic government problems.
It is one of the poorest countries in the world’s poorest continent, ranking at the bottom of the World Bank’s Human Development Index. To make matters worse 85% most of the country’s exports are held in French treasuries, and its currency of choice, the CFA franc, is heavily biased towards economic development in France. Consequently, entering a neutral, open-source and censorship-resistant monetary system like bitcoin can not only benefit, but also liberate a country.
Like El Salvador, CAR law It will make Bitcoin “official money”. Naturally, this decision was welcomed by bitcoin supporters around the world. Moreover, on social media, CAR President Faustin-Archange Touadéra, a mathematician and Bitcoin supporter, appeared inclined to support the adoption of the unique cryptocurrency. Pro-Bitcoin tweets praise El Salvador’s laser-eyed president, Nayib Bukele.
It’s math #language of the universe.#Bitcoin is universal money.
— Faustin-Archange Touadéra (@FA_Touadera) April 27, 2022
However, the celebration and support for the country among the Bitcoin community was short-lived as the country launched its own token project despite official visits from Bitcoin-only supporters, including Galoy Money. Days after the Bitcoin law came into effect, the country surprised the crypto community announces The creation of a cryptocurrency called Sango. A population of 5 million will also benefit from the “crypto center” in the capital Bangui.
Cointelegraph sat down with Mamadou Moustapha Ly, the Central African technician overseeing the development of Sango Coin, in Senegal, West Africa, to ask questions about the development of the project. A payments expert, Ly also runs fintech startup Kete Cash. Ly shed light on the creation of what he calls a “token, not a currency,” labeled Sango. Sango is a token that will accompany the country’s plans to accept Bitcoin as legal tender.
First, Ly emphasized that the Bitcoin-legal tender law makes it clear that the country will accept Bitcoin. No mention of other cryptocurrencies or even Sango Coin. He made a clear distinction between Sango and Bitcoin:
“The law states that the legal tender digital currency is Bitcoin. We recognize it as our official currency. […] The Sango coin is a project for the state of the Central African Republic.
Sango Coin offers attractive incentives to foreign investors, including citizenship by investment and eventual CAR passport, as well as management benefits. In a sense, buying Sango is a way to acquire residency in the country without touching government-issued fiat currencies.
A remarkable effort
But why was this necessary? El Salvador has not created a new token to support its Bitcoin adoption efforts – so why CAR?
To compare the Bitcoin adoption strategies of the two countries, both countries have declared Bitcoin as legal tender. From this moment they are separated from each other. In El Salvador, foreigners could initially buy residency with an investment of 3 BTC, although it was later revoked. “e-residency can be obtained in CAR […] By locking a fixed pledge of $6000 SANGO coins for 3 years. Moreover, foreign investors can directly access the country’s strategic resources through the use of cryptotoken, Ly explained.
To gain exposure to El Salvador’s rapid development without touching Bitcoin, the Central American country has stocked up on volcanic bonds. Vulcan or Bitcoin bonds support the creation of “Bitcoin City” and are backed by the government. In contrast, Sango is a cryptocurrency built on a “Bitcoin-backed” blockchain.
The now defunct Luna Classic (LUNC) token was the last time a token used Bitcoin as its treasury. The token’s collapse wiped billions of dollars off the cryptocurrency’s total market cap and shook confidence in the industry. So, why create an icon? Why build a system that is vulnerable to being hacked or attacked by malicious players? And why do it despite the best interest of the Bitcoin contingent to run a Bitcoin-only path?
Ly explained that Sangon is a “government project”. The money raised from the sale of Sango Coin will be used to buy Bitcoin, which can then be used to purchase materials for development projects, as well as pay for labor and other costs.
It is important to note the difficult financial situation of the country. Reports show that civil servants and government salaries are paid by former colonial France, which the Heritage Foundation’s 2022 Index of Economic Freedom labels the country as a “repressed” economy.
While Bitcoin proponents hail the adoption of Bitcoin as a solution to most modern-day problems, the priorities in CAR are clean water, security, education, and perhaps internet connectivity. With these motivations, the country needs rapid investment.
At this point, Ly noted that the high level of external debt of the Central African Republic makes it difficult for the country to access traditional forms of financing. Sango Coin can be this alternative funding source. Indeed, it can be concluded that the rapid liquidity provided by Sango is a springboard for much-needed foreign direct investment (FDI) into the country.
Related: ‘We don’t like our money’: The story of CFA and Bitcoin in Africa
In addition, the use of cryptotoken allows for greater flexibility and speed in conducting financial transactions, as well as reducing the risk of fraud, he commented. In some ways, the use of Sango can bypass the bureaucracy and slow administrative practices that Central African governments are known for. Moreover, it could allow investment to flow into the country without touching the dollar or the local currency.
When asked why the Central African Republic didn’t just use Bitcoin or the super-fast Lightning Network for these purposes, Ly reiterated that Sango Coin was intended to serve as a token associated with the government project: “It’s not a general-purpose currency.”
Sango can allow greater control over the flow of funds, therefore reducing the risk of capital flight. In addition, the World Bank notes that the country will not be able to develop its human capital without continuously strengthening domestic revenue mobilization. Sango can be the fastest way to stronger returns.
Bitcoin on earth
Paco De La India, also known as “Run with Bitcoin”, recently traveled for two weeks in CAR in hopes of spending Bitcoin and interacting with Bitcoin people. He told Cointelegraph:
“There wasn’t even one company that accepted Bitcoin. I gave my guide a tip about Bitcoin. “I paid my host with Bitcoin.”
These minor successes aside, Paco told Cointelegraph that Bitcoin adoption on the ground is minimal. In a country where less than a quarter of the country has access to the internet – a key requirement to use “magic internet money” – this is hardly surprising.
As for the creation of Sango Coin, Paco suggested that outside forces may have been at play. CAR is extremely resource-rich, so why couldn’t the French state-run project get involved in creating the token? asked a question. The token was indeed created soon after state visits to Dubai, one of the world’s cryptocurrency hubs.
Ly explained that external influences influence 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.”
A deal was struck with foreign investors, but there was no suggestion that the former colonial power could use Sango Coin to control resources. It might just be the fastest way to raise capital and, as Ly suggests, use that capital to buy Bitcoin and build the country’s infrastructure.
Ultimately, the adoption of Bitcoin and the creation of Sango appears to be a ploy to bring in much-needed FDI into the country and boost the country’s reputation globally. However, the creation of this token could distract from the wider Bitcoin community’s interest in places and jurisdictions that have likely announced their plans for Bitcoin from front-line investors.