The International Monetary Fund (IMF) has repeatedly expressed alarm at the possible adoption of Bitcoin (BTC) as a legal currency by various countries. While the Central African Republic has just made the cryptocurrency an official currency, the institution reiterates its warning. What is it afraid of
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IMF hostile to Central African Republic’s adoption of Bitcoin
It was the big news last week: the Central African Republic has adopted Bitcoin as legal tender, alongside the CFA franc. It is the second country to do so, after El Salvador in September 2021.
This is a cause for concern for the IMF, which had already sounded the alarm last year. The institution considers that the “cryptoization” of certain economies, which we are currently witnessing, is a danger. For it, this is a problem rather than a solution in countries that are already financially fragile.
So it’s back to the Central African Republic. The IMF explained to Bloomberg:
The adoption of Bitcoin as a legal tender in the Central African Republic poses major challenges in terms of transparency, legality and economic policy.
The institution is therefore positioning itself as a resource, explaining that its teams are assisting the authorities in the Central African Republic and the region as a whole, “in order to address the concerns raised by the new law”.
A decision taken without consultation with the rest of the currency area
As a reminder, the Central African Republic shares the use of the CFA franc with 6 other states, members of the Central African Financial Cooperation. The decision to adopt the BTC was taken without consultation with them, and especially without consultation with the Governor of the Bank of Central African States (BEAC). These are the two points that have also raised concerns at the regional and global level.
Other issues were raised: Internet access is very poor in the Central African Republic, which is necessary for Bitcoin transactions. Only 557,000 of the country’s 4.8 million inhabitants have access.
The spread of this new currency in the Central African Republic will therefore be watched carefully. Beyond the risk considerations, this shows once again that it is the most fragile economies that are turning to Bitcoin, finding no solution in the traditional monetary systems.
