After the Central African Republic (CAR) announced last month that it accepted bitcoin as legal tender and legalized the use of cryptocurrencies, the International Monetary Fund (IMF) said the move could cause financial instability in the country.
Previously, the organization has spoken out strongly against El Salvador’s adoption of bitcoin and President Nayib Buquele’s ambitious plan to issue bonds backed by bitcoins.
The IMF argues that the macroeconomic and legal uncertainties associated with bitcoin adoption are worrisome:
The adoption of bitcoin as legal tender in the CAR raises serious legal, transparency and economic policy concerns.
IMF staff are assisting regional and Central African authorities with the challenges posed by the new law.
As the first African country to recognize bitcoin as its currency, the CAR has faced a backlash from the international community and domestic opposition forces. The government has been accused of passing such a law without consulting opposition parties and the regional central bank responsible for managing the currency used by the CAR and five other countries in the region.
The authorities, however, believe that the adoption of bitcoin as legal tender will contribute to the recovery and growth of the country’s economy after a decade of civil war.
Note that the CAR’s existing currency is not currently recognized by the IMF. This makes international trade with this country and a dozen other African countries extremely difficult and highly dependent on France. The United Nations considers the CAR one of the poorest countries in the world, where only 11 percent of the population has access to the Internet.