The list of countries accepting cryptocurrency as legal tender recently grew to two with the Central African Republic signing on and accept Bitcoin as a fiat alternative. But it’s not going happen without some big changes.
The CAR’s Expensive Internet
There is little doubt Central Africa Republic’s decision to designate bitcoin (BTC) as legal tender has surprised many. Few people expected CAR — one of Africa’s most impoverished countries and one whose economy has been ravaged by a civil war — to be the first to adopt bitcoin.
For critics still trying to understand why another nation has joined El Salvador in making bitcoin legal tender, the CAR’s move is perplexing. To begin with, they cannot understand how a country with such a low internet penetration rate — less than 12% — has chosen the top cryptocurrency as its transacting currency.
The Central Africa Republic’s reported infrastructure deficit and the fact that mobile connections are only available to 30% of the population seemingly renders the case for adopting bitcoin less convincing. Also, according to a 2018 ICT Profile of the CAR, the country’s then “uncertain institutional situation” was said to be constraining investment in broadband networks and access to cross-border submarine cables.
As a result of this and many other factors, the Central African Republic, according to the ICT profile, has had to rely on expensive satellite connections for most of its international internet bandwidth and this translates to high internet prices. Expensive internet is one of the many barriers that impede adoption efforts.
Despite these seemingly insurmountable challenges, proponents of bitcoin and supporters of an alternative financial system are adamant the Central African Republic’s decision proves digital currencies have a role to play. This is particularly true for countries that are cut off from the global financial system.
Private Money Can Still Be Legal Tender
For followers of Friedrich Hayek, a famous Austrian economist and proponent of private money, the adoption of bitcoin by El Salvador and now the Central African Republic proves he was right — there is indeed a place for private money.
Despite the strong opposition from institutions like the International Monetary Fund (IMF), some believe more countries will still make bitcoin legal tender. In fact, reports that some 44 countries were represented at El Salvador’s recent bitcoin exhibition suggest more countries might follow in the footsteps of these two countries.
While it is logical to assume that the CAR plans to invest heavily in the development of the telecommunication infrastructure, the mere increase in the sum of funds earmarked for this is no guarantee this will also lead to changed attitudes towards bitcoin.
The CAR must therefore ensure it has funds reserved for efforts that are aimed at boosting the population’s understanding of bitcoin and how to buy bitcoin for the first time. Indeed, education is still key to eradicating ignorance, not just in the Central African Republic but across much of the developing world.
Learning the Basics
A majority of the CAR’s more than 5 million inhabitants must become acquainted with the basics such as a bitcoin wallet, recovery phrases or a wallet’s public address. When that is achieved, the chances of the CAR succeeding in becoming a country where bitcoin functions as legal tender and a transactional currency will be greatly enhanced.
On top of educating its population, the CAR needs to work with players in the crypto space like cryptocurrency exchanges, payment processors, and wallet providers. Just like the first country to adopt bitcoin El Salvador, which has since sought the services of a cryptocurrency exchange, the African country also needs to partner with a reputable player in the industry.
If the Central African Republic decides to follow the recommendations suggested in this article, it could well achieve its goal of seeing bitcoin become the country’s reference currency much sooner. The same is true for any other country that wants to make bitcoin an alternative legal tender.
Countries Where Cryptocurrency is Banned
Whereas the majority of countries don’t make using Bitcoin itself illegal, its status as a means of payment or as a commodity varies with differing regulatory implications.
Some countries have placed limitations on the way Bitcoin can be used, with banks banning its customers from making cryptocurrency transactions. Other countries have banned the use of Bitcoin and cryptocurrencies outright with heavy penalties in place for anyone making crypto transactions.
Algeria
Algeria currently prohibits the use of cryptocurrency following the passing of a financial law in 2018 that made it illegal to buy, sell, use or hold virtual currencies.
Bolivia
There is a complete ban in place on the usage of Bitcoin in Bolivia since 2014. The Bolivian Central Bank issued a resolution banning it and any other currency not regulated by a country or economic zone.
China
China has cracked down on cryptocurrencies with increasing intensity throughout 2021. Chinese officials have repeatedly issued warnings to its people to stay clear of the digital asset market and have clamped down hard on mining in the country as well as currency exchanges in China and overseas.
On August 27, Yin Youping, the Deputy Director of the Financial Consumer Rights Protection Bureau of the People’s Bank of China (PBoC), referred to cryptos as speculative assets and warned people to “protect their pockets”.
Efforts to undermine Bitcoin – a decentralised currency outside the control of governments and institutions – are largely seen as an attempt by the Chinese authorities to float their own e-currency.
The PBoC is looking to be one of the first major central banks in the world to launch its own digital currency, and in doing so would be able to more closely monitor the transactions of its people.
On September 24, the PBoC went further and outright banned cryptocurrency transactions in the country.
Colombia
In Colombia, financial institutions are not allowed to facilitate Bitcoin transactions. The Superintendencia Financiera warned financial institutions in 2014 that they may not “protect, invest, broker, or manage virtual money operations”.
Egypt
Egypt’s Dar al-Ifta, the country’s primary Islamic advisory body, issued a religious decree in 2018, classifying Bitcoin transactions as “haram,” something prohibited under Islamic law. While not binding, Egypt’s banking laws were tightened in September 2020 to prevent trading or promoting cryptos without a Central Bank licence.
Indonesia
Bank Indonesia, the country’s central bank, issued new regulations banning the use of cryptocurrencies, including Bitcoin, as a means of payment from 1 January 2018.
Iran
Bitcoin has a complex relationship with the Iranian regime. In order to evade the worst impact of crippling economic sanctions, Iran has instead turned to the lucrative practice of Bitcoin mining in order to finance imports.
While the Central Bank prohibits the trading of cryptocurrencies mined overseas, it has encouraged Bitcoin mining in the country with incentives.
Around 4.5 per cent of the world’s Bitcoin mining takes place in Iran, which, according to blockchain analytics firm Elliptic, could account for revenues of over $1 billion (€843 million).
In order for the crypto industry to flourish, Iran has offered licenced miners cheap energy but requires all mined cryptos to be sold to the Central Bank.
However, unlicensed mining drains more than 2GW from the national grid every day, causing power shortages.
To this end, Iranian authorities issued a four-month ban on Bitcoin mining until September 22.
India
India is becoming increasingly hostile towards cryptocurrencies. On November 23, the government announced its intention to introduce a new bill to the Indian parliament which would establish a new central bank-backed digital currency as well as ban almost all cryptocurrencies.
Earlier in 2021, it had considered criminalising the possession, issuance, mining, trading, and transference of crypto assets. Prime minister Narendra Modi said he wanted to ensure crypto “does not end up in wrong hands, which can spoil our youth”.
Iraq
Despite sustained efforts by authorities to block their use, cryptocurrencies are becoming increasingly popular in Iraq. The Iraqi Central Bank has been particularly hostile, issuing a statement in 2017 prohibiting their use which is still in force to the present day. In early 2021, the Ministry of Interior of the Kurdistan regional government issued similar guidance to stop money brokerages and exchanges handling cryptos.
Kosovo
While the holding or trading of cryptocurrency assets isn’t yet prohibited in Kosovo, the government announced a ban on crypto mining in early January, blaming a growing energy crisis. The country, which unilaterally declared its independence in 2008, is facing historic power shortages with scheduled power cuts now being put into place to conserve energy. In a further bid to curb energy wastage, Economy Minister Atrane Rizvanolli announced a long-term ban on crypto mining in the country. Police have been tasked with enforcing the ban as well as pinpointing mining locations throughout the country.
Nepal
The Nepal Rastra Bank declared Bitcoin illegal as of August 2017.
North Macedonia
North Macedonia is the only European country so far to have an official ban on cryptocurrencies, such as Bitcoin, Ethereum, and others, in place.
Russia
Russia has a chequered association with cryptocurrency, made all the more complicated by its ongoing invasion of Ukraine.
While crypto isn’t outlawed in Russia, there was until recently a conflict being waged against its use. Now, it is being seen as some as a saviour to help the country evade heavy financial sanctions imposed by the West.
Russia passed its first laws to regulate cryptos in July 2020, which for the first time designated cryptocurrency as property liable to taxation.
The law, which came into force in January this year, also bans Russian civil servants from owning any crypto assets.
Russian President Vladimir Putin has repeatedly linked cryptocurrency with criminal activity, calling for closer attention to cross-border crypto transactions in particular.
In July, the prosecutor general announced new proposed legislation which would allow police to confiscate cryptos deemed to be illegally obtained citing its use in bribery.
However, as the world’s third largest mining hub according to data from Cambridge University, it’s feared that Russia could now embrace crypto and harness its natural resources to exploit Bitcoin mining rather than disparage it.
Turkey
Many in Turkey turned to cryptocurrency as the Turkish lira plummeted in value. With some of the highest levels of use anywhere in the world, the arrival of regulations was swift this year as inflation peaked in April.
On 16 April 2021, the Central Bank of the Republic of Turkey issued a regulation banning the use of cryptocurrencies including Bitcoin, directly or indirectly, to pay for goods and services. The following day, Turkish president Recep Tayyip Erdoğan went further and issued a decree that crypto exchanges to a list of firms subject to anti-money laundering and terrorism financing rules.
Vietnam
The State Bank of Vietnam has declared that the issuance, supply, and use of Bitcoin and other cryptos are illegal as a means of payment and are subject to punishment of fines ranging from 150 million VND (€5,600) to 200 million VND (€7,445).
However, the government doesn’t ban Bitcoin trading or holding them as assets.
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