- The Central African Republic has become the second to legalise Bitcoin in the world.
- Bitcoin will be a legally accepted payment method, alongside the regional currency, the Central African CFA franc (XAF).
- According to crypto asset management firm Fidelity, if enough countries jump on the crypto bandwagon, others will have no choice but to follow suit.
The Central African Republic (CAR) has made history by becoming the second country in the world to grant Bitcoin legal status after El Salvador. The proposed bill was signed into law after getting a unanimous go-ahead from the country’s National Assembly — akin to the Parliament in India.
Just like El Salvador’s economy, which depends on the US dollar, CAR’s regional currency is backed by the French. This means that the country does not have an independent monetary policy, and hence, no control over the supply of money within its borders.
As things stand, the Central African CFA franc (XAF) has an average annual inflation rate of 4.8%. However over the past five years, the inflation rate has fluctuated in a wide range of -3% to 12%.
Bullish on crypto adoption
Earlier this year, crypto investment firm Fidelity predicted that more governments and even a central bank could buy Bitcoin in 2022. According to its report, if enough countries jump on the bandwagon, others would likely follow suit — if only to prevent themselves from being at a competitive disadvantage.
If Bitcoin adoption increases, the countries that secure some bitcoin today will be better off competitively than their peers. Therefore, even if other countries do not believe in the investment thesis or the adoption of Bitcoin, they will be forced to acquire some as a form of insurance.
El Salvador’s neighbor Panama is also widely regarded as one of the front-runners to make Bitcoin legal tender. A draft proposal was unveiled in September last year — within 24 hours of El Salvador’s new Bitcoin regulations coming into play — but is yet to become law.
Certain senior officials in Malaysia were also quoted as gunning for the government to make Bitcoin legal tender alongside other crypto assets, according to a Bloomberg report from March. However, this speculation was short-lived with the country’s deputy finance minister clarifying that the government has no such intention.