Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Heart podcast,
Speaker 1: and I'm Stacy Marie Ishmael, Managing editor of Crypto for
Speaker 1: Bloomberg News. It's Friday, September sixte by now you've probably
Speaker 1: heard and definitely on this podcast that El Salvador became
Speaker 1: the first country in the world to adopt bitcoin as
Speaker 1: legal tender, all the way back in September of one.
Speaker 1: But did you know that the Central African Republic has
Speaker 1: made a similar move in April, becoming the first country
Speaker 1: in Africa to welcome a cryptocurrency to its sovereign ranks,
Speaker 1: que to no one's surprise, almost immediate expressions of skepticism
Speaker 1: and concern from organizations like the International Monetary Fund and
Speaker 1: the World Bank, to say nothing of internal disagreement and
Speaker 1: confusion within cr itself. Why would a country with very
Speaker 1: low levels of access to electricity or the internet follow
Speaker 1: the path of a digital token? Who stands to benefit
Speaker 1: and who stands to lose? Joining me now is it's
Speaker 1: difficult to see how they're going to move forward. It's
Speaker 1: almost like they're learning as they're going. Katarina, welcome now.
Speaker 1: Our listeners will be more than familiar by this point,
Speaker 1: with the fact that last September one, El Salvador became
Speaker 1: the first country in the world to accept bitcoin as
Speaker 1: legal tender. Following the Salvadorian news, a number of politicians
Speaker 1: in Latin America, many of them younger on the millennial side,
Speaker 1: signaled their affinity for bitcoin as well. This is a
Speaker 1: really bold first move, very central American country. What it
Speaker 1: means for bitcoin is um there are businesses in El
Speaker 1: Salvador that will be required to accept this if they're
Speaker 1: technologically able. But now there's a number two. Yes. So
Speaker 1: the Central African Republic adopted bitcoin as legal tender in
Speaker 1: April this year. It was met with shock, confusion, and
Speaker 1: also a bit of enthusiasm from from some bitcoin experts
Speaker 1: and and enthusiasts. I guess that people you know sort
Speaker 1: of saw another country adopting bitcoin after El Salvador, but
Speaker 1: it probably didn't expect it to be a small African
Speaker 1: country that many have never heard of two to be
Speaker 1: the one to follow suit, especially as car might not
Speaker 1: have the paper it might look look like the country
Speaker 1: that would adopt bitcoin. With low internet connectivity and an
Speaker 1: ongoing conflict that has sort of both plagued the economy
Speaker 1: the country for the past basically for the past decade.
Speaker 1: You've also reported on a You and your colleagues have
Speaker 1: reported on the fact that unlike in El Salvador, where
Speaker 1: you know, the government seemed to be unanimous with the
Speaker 1: central bank and maybe not all of the population, but
Speaker 1: they had a lot of internal support for we're going
Speaker 1: to do this thing, the story in car seemed to
Speaker 1: have shaken out a little bit differently, like what what's
Speaker 1: been happening. I mean, it was voted by by parliament,
Speaker 1: but if it also voted by by handclapping, and a
Speaker 1: lot of the lawmakers didn't really seem to know what
Speaker 1: they're voting on. Now. The one who's been pushing this
Speaker 1: this initiative through is the president for Santa Change, who
Speaker 1: has a pH d in mathematics and at least seemed
Speaker 1: to understand the logics of of cryptocurrencies and bitcoin. But
Speaker 1: the opposition was against the proposal from the beginning. Very
Speaker 1: early on, you had backlash from the center, the Central Bank,
Speaker 1: who noted that actually adopting bitcoin as a second currency
Speaker 1: next to the Central African Front, which is used by
Speaker 1: by six countries in Central Africa, would be illegal, and
Speaker 1: that could actually lead to the expulsion of the Central
Speaker 1: African Bank from the Regional Monetary Union. There's also been
Speaker 1: pushed back from the International Monetary Fund and the World Bank,
Speaker 1: who bold against the adoption of bit kind of legal
Speaker 1: tender in car, which they've been very consistent on because
Speaker 1: they told us alf the exact same thing that you know,
Speaker 1: like the the i m F and the World Bank
Speaker 1: are generally not keen on sovereign countries exposing themselves to
Speaker 1: a degree of you know, risk and volatility and currency
Speaker 1: fluctuations on top of everything that they're already dealing with.
Speaker 1: But let's talk a little bit more about in practice,
Speaker 1: like what does it mean for cars to accept bitcoin?
Speaker 1: Is legal tender? Is it now that you can walk
Speaker 1: into any shop and pay in bitcoin or people doing that?
Speaker 1: Like what has changed materially in the country. Not much
Speaker 1: underground as far as I am aware, only about eleven
Speaker 1: percent of the population actually has Internet connection, and I
Speaker 1: mean many people don't even have bank accounts. It's it's
Speaker 1: a very poor country on paper, and most people wouldn't
Speaker 1: be be able to invest in bitcoin at all. So
Speaker 1: from from the outlook of it doesn't seem like it
Speaker 1: has changed. Much underground of course a CAR. This hasn't
Speaker 1: stopped CAR from moving forward and also launching their own
Speaker 1: cryptocurrency and continuing to to promote investments in though countries
Speaker 1: mintal sectors. CAR has large natural resources of gold, diamonds
Speaker 1: and other mintals, even timber, and one one objective of
Speaker 1: launching or adopting bitcoin as legal tender was actually to
Speaker 1: be able to to at act investors to those sectors. Well,
Speaker 1: before we talk about whether they've been successful in attracting
Speaker 1: external investors, let's talk about the fact that they also
Speaker 1: launched their own cryptocurrency. You say, say a little bit
Speaker 1: more about that. So this was a product that was
Speaker 1: launched in July. That's when the CAR launched the single coin,
Speaker 1: and the president for Santa Seanstrada said famously at an
Speaker 1: online event marketing the crypto project that for them, the
Speaker 1: formal economy was long an option and the cryptocurrency was
Speaker 1: the future. For CAR and obviously have a very young population,
Speaker 1: so if if they could invest in benefit from it,
Speaker 1: it would be it would be a good solution. CAR
Speaker 1: then moved on very quickly to to open up the
Speaker 1: sale of sanle coin, which would allow well you could
Speaker 1: get an e residency. There was the possibility of acquiring
Speaker 1: land through through the single coin, but it was also
Speaker 1: done at very high risk. No one really knew what
Speaker 1: it was. Pegg two was actually securing that this currency
Speaker 1: and some of these investments would require a ten era
Speaker 1: locking period of your investment. So so far, investment has
Speaker 1: been slow. Investment hasn't fluent into sango coin. What does
Speaker 1: sango mean? Sango is the actually the local language which
Speaker 1: is spoken across car So there's kind of an idea
Speaker 1: in addition to what you're saying about this being something
Speaker 1: that folks can feel proud of, feel attached to, that
Speaker 1: like represents the country in this digital forum. But to
Speaker 1: your point, it does seem to be have been pitched
Speaker 1: to external investors more and than necessarily the people in
Speaker 1: the country itself. Right, with eleven percent internet penetration, sporadic
Speaker 1: access to electricity, they're probably not a lot of people
Speaker 1: day to day who are going to add this to
Speaker 1: their list of things that they're super keen on. Have
Speaker 1: international investors shown interest and appetite for any of this, well,
Speaker 1: approtetite has been slow so far. I think that the
Speaker 1: last time I checked, single coin had sold for about
Speaker 1: one point six million dollars, and the initial value that
Speaker 1: they put on the market in the first round it's
Speaker 1: going to be twelve sales in total was about twenty
Speaker 1: one million, so again very slow interest. That they extended
Speaker 1: the period I was supposed to actually end last month
Speaker 1: until end of this month, stating that the enormous interest
Speaker 1: would needed to extend the period. But if you look
Speaker 1: at the sales, it doesn't really match what they're saying
Speaker 1: in in statements because the numbers are not reflecting kind
Speaker 1: of the same enthusiasm, not not at this point. And
Speaker 1: I guess that's I mean, that's a risk part of
Speaker 1: the project effected. Again you have a long locking period.
Speaker 1: And it was also said that the single coins that
Speaker 1: you used brought either by through ethereum or a bitcoin,
Speaker 1: couldn't be traded back. Wow, okay, so very significant constraints
Speaker 1: on your ability to get in and out of a
Speaker 1: single coin position. In other words, I want to ask
Speaker 1: you a little bit because I saw a story that
Speaker 1: you and one of your colleagues published around the end
Speaker 1: of August around the country's highest court, saying that an
Speaker 1: incentive program the government was trying to offer to people
Speaker 1: who bought single coins was unconstitutional. What was that program?
Speaker 1: The CAR has been offering people to buy land for
Speaker 1: investing in sanle coin. There was also an e residency
Speaker 1: program and also the possibility of getting Central African nationality
Speaker 1: by investing sixty tho dollars and then the locking period
Speaker 1: of up to five years. Now, obviously the Constitutional Court
Speaker 1: said that this is not how we allocate land in CAR.
Speaker 1: Just need to go through a government to decision of
Speaker 1: the Parliamentary Parliament actually has to be in there the decision.
Speaker 1: And also our citizenships are not to have for grab
Speaker 1: food investing in cryptocurrency. And thirdly, the option of the
Speaker 1: residency doesn't exist in the CAR at this moment, so
Speaker 1: it wouldn't be a possibility. Now CAR is actually in
Speaker 1: the process of adopting a new constitution and it seems
Speaker 1: like authorities could be changing that document into possibly fitting
Speaker 1: the Sango projects objectives. Got it. So this is one
Speaker 1: of those we'll just have to wait and see, you
Speaker 1: know what actually what actually shakes out there exactly, And
Speaker 1: that's only the residency and the and the land acquisations
Speaker 1: is only up in the in the following it rounds.
Speaker 1: It's not on the table or not for sale at
Speaker 1: the moment when we talk about the residency. As far
Speaker 1: as I'm aware, Estonia was one of the first places
Speaker 1: in the world to offer this, and the idea is like,
Speaker 1: you know, for the folks in the US world saying
Speaker 1: to this, it's like a digital green card almost where
Speaker 1: you don't become a citizen, but you get access to
Speaker 1: to certain elements of the economy, to stat us. You know,
Speaker 1: you kind of get like an identity card. Does that
Speaker 1: framework even exist at all in car for them to
Speaker 1: be able to offer something like this or is it
Speaker 1: more like if you buy this, at some point in
Speaker 1: the future, you may have access to something that looks
Speaker 1: like this. I mean, at the moment, this doesn't exist,
Speaker 1: but the Constitutional Court was was very clear about again
Speaker 1: this is this is something that they're hoping to offer
Speaker 1: in the future. So it's still not up for sale,
Speaker 1: but it seems like the framework to even offer any
Speaker 1: residency is not there at the moment. Coming up, more
Speaker 1: from Bloomberg reporter Caterinaa on how bitcoin is shipping up
Speaker 1: in the Central African Republic. We'll be right back for
Speaker 1: folks who have you know, maybe this is the first
Speaker 1: time they're encountering Car in the wild. What are some
Speaker 1: of the key things that they should understand about the
Speaker 1: challenges that the government is facing in trying to drive
Speaker 1: adoption of these policies. Well, I mean, first of all,
Speaker 1: the internet connectivity. Again, car is one of the least
Speaker 1: connected countries in the world. It also has one of
Speaker 1: the lowest GDPs about two point three billion according to
Speaker 1: World Bank. The population for the most part is kept
Speaker 1: outside of the financial system, while they do use the
Speaker 1: mobile money service providers. That was just four pc of
Speaker 1: the Placian eight fifteen years or more, again according to
Speaker 1: World Bank data. And if you want to compare, the
Speaker 1: percentage of El Salvadose population with access to the banking
Speaker 1: system was around this is in twenty seventeen. So already
Speaker 1: indicators that are a bit lower than the than El
Speaker 1: Salvador or this little infrastructure in general, again the Internet connectivity,
Speaker 1: but even things like like Rhodes, they don't have enough electricity.
Speaker 1: If they want to tax to set up a bitcoin
Speaker 1: mining operations that that probably wouldn't be possible in card
Speaker 1: and you would then the whole country would go go
Speaker 1: black or whatever it split up would probably be in darkness.
Speaker 1: Social indicators are pretty dire. People don't, like you pointed out,
Speaker 1: people don't have the money to invest in in bitcoin
Speaker 1: and crypto. What's interesting hearing from you is these are
Speaker 1: very similar to some of the concerns that places like
Speaker 1: the I m F and the World Bank and cryptos skeptics.
Speaker 1: More broadly, we're raising about Al Salvador. Obviously, as you've mentioned,
Speaker 1: Al Salvador is significantly further along on several of those indicators,
Speaker 1: including internet penetration, consistency of electricity. You know, Salvador is like, well,
Speaker 1: we have a volcano, so we have a totally different
Speaker 1: way of thinking about the possibility of of bitcoin mining.
Speaker 1: But despite them being more ahead on on many indicators,
Speaker 1: they still haven't seen widespread adoption of bitcoin among you know,
Speaker 1: the rank and file of the population. Right, They too
Speaker 1: have really seen an influx in tourism, in foreign investor interest,
Speaker 1: and sentiment, but not so much your average person in
Speaker 1: the market trying to buy something being like, hold on,
Speaker 1: let me whip out my bitcoin wallet and and pay
Speaker 1: for this thing. Do you expect from your knowledge of
Speaker 1: your previous experience of the region that this will be
Speaker 1: something that two years from now, you know, the government
Speaker 1: is like, Okay, we tried it, it was an interesting
Speaker 1: marketing campaign. We're going to move on to something else.
Speaker 1: Or is there any indication that this is something they
Speaker 1: have actually really high conviction around and they're going to
Speaker 1: keep trying to make successful despite the challenges you've identified.
Speaker 1: I mean, maybe it's a letter challenge again that not
Speaker 1: a lot of people in government understand its prodict totally.
Speaker 1: The president he seems to know what's going on, but
Speaker 1: but at a government officials don't. I don't want to
Speaker 1: out rule the projected yet, but I mean, so far
Speaker 1: with interesting being low, I I don't. Yeah, it's difficult
Speaker 1: to see how they're gonna move forward. It's almost like
Speaker 1: they're learning as they're going. And of course another obstacle
Speaker 1: is the fact that they are part of the c
Speaker 1: IF A franc zone which is packed to the Euro
Speaker 1: and also controlled by the French Treasury, which means that
Speaker 1: they have limited the say over the monetary policies for example,
Speaker 1: and again, launching bitcoin or cryptocurrencies could possibly go against
Speaker 1: this system, which would which would then cut them out
Speaker 1: of the regional monetary union. It's interesting though, however, that
Speaker 1: since cars adoption of bitcoin the regional monetary union has
Speaker 1: actually started looking at possibly a digital currency, so it
Speaker 1: seems like they're warming apotlune idea, but but so far
Speaker 1: nothing has really moved forward on that end. So there
Speaker 1: are two things that you said that that are really
Speaker 1: interesting that I want to hold in on. One is,
Speaker 1: you know, much like Al Salvador, which uses the US dollar,
Speaker 1: lacked control over its on monetary policy, like cars, facing
Speaker 1: something very similar there, except they're using the euro uh
Speaker 1: instead of the dollar. But the other thing is that
Speaker 1: idea of this being a learning experience, not just for
Speaker 1: them but potentially that monetary union as a whole. That
Speaker 1: me in you know, twelve twenty four, Who knows how
Speaker 1: many months from now lead to something that looks more
Speaker 1: similar to like a digital euro, but for that union
Speaker 1: specifically exactly. I mean that sort of fits into the
Speaker 1: whole narrative across this region. That the fact that they
Speaker 1: need to keep at least fifty centers foreign assets with
Speaker 1: the French treasury. Again, the former colonial power has been
Speaker 1: facing growing criticism, partly for holding back economic development, so
Speaker 1: creating creating a single or even as a national currency
Speaker 1: or even a regional courtesy. I mean South Laftrican Authorities
Speaker 1: has promoted as a pan Affrican project could potentially attract
Speaker 1: other countries and you know, offer a bigger pickup at
Speaker 1: least give countries the idea that if going into crypto
Speaker 1: is a way to sort of move away from the
Speaker 1: from the French dependency and the dependency on the Euro. Well, Katharina,
Speaker 1: thank you so much for joining us and helping us
Speaker 1: understand what's been happening with car and crypto. A pleasure
Speaker 1: to have you on the show. On the next episode
Speaker 1: of Bloomberg Crypto, we're going to talk about exchange traded
Speaker 1: funds and specifically crypto et f s. These are products
Speaker 1: that are designed to give people exposure to things like
Speaker 1: bitcoin or to ether or two broader companies in the
Speaker 1: market without actually having to hold those things directly. There's
Speaker 1: some interesting and perhaps unhelpful stuff that's happening with their
Speaker 1: performance these days, and you'll hear more about that on
Speaker 1: the next episode. They is Bloomberg Crypto, a daily podcast
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Speaker 1: The supervising producer of Bloomberg Crypto is Vicky Verglina. Our
Speaker 1: senior producer is Janet Babin. Our producer is Sharon Barriro.
Speaker 1: Associate producer is Thi Butla Desta wonder At is our engineer.
Speaker 1: Original music by Leo Sidrn. I'm Stacy, Marie Ishmael. Have
Speaker 1: a great weekend.