More On: Bitcoin
Senators and regulators explain why the $60 billion collapse of a major cryptocurrency is not the industry's Bear Stearns moment
The Central African Republic has become the world's second country to embrace bitcoin as its official currency, following El Salvador's decision last year.
According to a statement from the presidency, lawmakers in the CAR's parliament voted unanimously to pass a measure legalizing bitcoin and other cryptocurrencies.
Bitcoin will be accepted as legal money alongside the CFA franc in Central Africa.
According to Reuters, President Faustin-Archange Touadera's chief of staff, Obed Namsio, hailed the decision "a crucial step toward opening up new chances for our country."
The Central African Republic is rich in diamonds, gold, and other important minerals, yet it is one of the world's poorest and least-developed nations.
According to the World Bank, over 71 percent of CAR's 5.4 million people lived below the international poverty level in 2020.
For years, the landlocked country in the heart of Africa has been wracked by political unrest and violence.
"The key question is for whom the cryptocurrency ruling is intended," David Gerard, an independent author who has closely followed crypto over the years, said CNBC.
"The CAR has an 11% internet penetration rate. It's possible that the government has been told that this will help the country bootstrap payments, but it's unclear how."
The decision to make bitcoin legal tender was lauded as another step toward mainstream adoption of cryptocurrencies by the crypto community.
It can, however, be perceived as divisive. El Salvador saw protests after enacting the Bitcoin Law, and the country was chastised by the International Monetary Fund.
El Salvador has been encouraged by the International Monetary Fund (IMF) to abandon bitcoin as legal cash, citing worries about the risks it poses to financial stability and consumer protection.
Bitcoin is a highly volatile asset, which raises concerns about its suitability as a payment method. It was last trading at $39,686 on Thursday, down 6% in the previous 24 hours. Since November, when it reached an all-time high of over $68,000, the cryptocurrency has lost nearly 42% of its value.
Many Western nations have expressed concern about Russia's possible use of cryptocurrency to avoid sanctions in the aftermath of its invasion of Ukraine.
According to the UN, CAR is a close ally of Russia, with Russian mercenaries providing direct help to the regime.
Experts believe the move will help small countries like the Central African Republic (CAR) minimize their reliance on the US dollar for global trade.
The dollar has been the global oil currency since the 1950s, according to Ransu Salovaara, CEO of crypto platform Likvidi.
"Because of the Ukraine and the SWIFT banking restriction, oil reliance is a significant concern right now, so worldwide, unstoppable cryptocurrencies like bitcoin may truly shine," he continued.
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