Bitcoin, Sango Coin and the Central African Republic

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In the spring of 2022, the Central African Republic (CAR) became the first African country to adopt Bitcoin (BTC) as legal tender.

As the second country in the world to recognize Bitcoin in this way, CAR has followed in El Salvador’s footsteps. El Salvador has since boasted of growing tourist numbers, a resilient economy, and a healthy amount of free PR since allowing its citizens to make daily purchases with the seminal cryptocurrency.

CAR, a significantly less economically developed economy than its Central American counterpart, hopes to emulate El Salvador’s success. Despite the country’s vast natural resource wealth, the CAR is plagued by poor economic management, low private and foreign investment, and systemic government problems.

It is one of the poorest countries on the poorest continent in the world, ranking at the very bottom of the World Bank’s Human Development Index. To make matters worse, up to 85% of the country’s exports are kept in French treasury bonds, while its currency of choice, the CFA franc, is heavily biased towards economic development in France. monetary system such as Bitcoin could not only benefit but emancipate the country.

Chairman Bitcoiners

Similar to El Salvador, the CAR law would make Bitcoin an official currency. Naturally, this move was welcomed by Bitcoin advocates around the world. Additionally, it emerged that CAR President Faustin-Archange Touadra, a mathematician and social media bitcoin supporter, was inclined to support the adoption of the single cryptocurrency. The pro-Bitcoin tweets are reminiscent of laser-eyed Salvadoran President Nayib Bukele.

Mathematics is the #language of the universe. #Bitcoin is the universal currency.

– Faustin-Archange Touadra (@FA_Touadera) April 27, 2022

However, the celebration and support for the country within the bitcoin community was short-lived as, despite official visits from bitcoin-only supporters including Galoy Money, the country launched its own token project. Just days after the Bitcoin law came into force, the country surprised the crypto community by announcing the creation of a crypto token called Sango. The population of 5 million would also benefit from a crypto hub in the capital, Bangui.

A Francophone contingent of established Bitcoiners visits the CAR in May. Source: Twitter

Cointelegraph sat down in Senegal, West Africa, with Mamadou Moustapha Ly, the Central African technician who oversaw the development of Sango Coin, to ask about the development of the projects. A payments expert, Ly also runs fintech start-up Kete Cash. Ly shed light on the creation of what he called a token, not a currency, labeled Sango. Sango is the token that would accompany the country’s plans to adopt Bitcoin as legal tender.

Cointelegraph talks to Ly in Senegal.

First, Ly pointed out that the Bitcoin as Legal Tender Act clearly states that the country will adopt Bitcoin. There is no mention of other cryptocurrencies or even Sango Coin. He painted a clear divide between Sango and Bitcoin:

The law states that the digital currency that is legal tender is Bitcoin. We recognize it as our official currency. […] The Sango play is a project for the state of the Central African Republic.

Sango Coin offers attractive incentives for foreign investors, including citizenship by investment and possibly a Central African passport, as well as governance benefits. In a sense, buying Sango is a way to buy a residence in the country, without touching government-issued fiat currencies.

A symbolic effort

But why was it necessary? El Salvador hasn’t created a new token to support its bitcoin adoption efforts, so why would CAR?

To compare the Bitcoin adoption strategies of the two countries, both countries announced that Bitcoin is legal tender. From then on, they diverge. In El Salvador, foreigners could initially buy a residence with an investment of 3 BTC, although it was later canceled. In CAR, e-residency can be obtained […] by locking in a fixed SANGO parts warranty in the amount of $6000 for a period of 3 years. Additionally, foreign investors can directly access the country’s strategic resources through the use of the crypto token, Ly explained.

To expose itself to the rapid development of El Salvador without touching Bitcoin, the Central American country created volcanic bonds. Volcano or bitcoin bonds support the creation of a bitcoin city and are backed by the government. In contrast, Sango is a cryptocurrency built on a Bitcoin-backed blockchain.

The now defunct Luna Classic (LUC) token was the last time a token used Bitcoin as cash. The token crash wiped billions of dollars from the total crypto market capitalization and shook confidence in the industry. So why create a token? Why build a system susceptible to being hacked or attacked by malicious actors? And why, despite Bitcoin contingents, do they have an interest in following a Bitcoin-only path?

Ly explained that Sango is a government project. The money raised from the sale of Sango Coin will be used to buy Bitcoin, which can then be used to acquire materials needed for development projects, as well as pay for labor and other expenses.

It is important to note the disastrous financial situation of the country. Reports continue to indicate that government officials and salaries are being paid for by its former colonizer, France, as the country is labeled a repressed economy according to the Heritage Foundations’ 2022 Index of Economic Freedom.

While bitcoin proponents hail bitcoin adoption as a panacea to most modern problems, in CAR the priorities are clean water, security, education, and then perhaps internet connectivity. With these motivations, the country needs investments quickly.

The African franc.

At this point, Ly noted that the Central African Republic’s high level of external debt makes it difficult for the country to access traditional forms of financing. Sango Coin could be this alternative source of funding. Indeed, one could deduce that the rapid liquidity provided by Sango is a means of reviving much-needed foreign direct investment (FDI) in the country.

Related: We Don’t Love Our Money: The History of CFA and Bitcoin in Africa

Additionally, the use of a crypto token allows for greater flexibility and speed in conducting financial transactions, as well as reducing the risk of fraud, he commented. In a sense, the use of Sango could circumvent the bureaucracy and slow administrative practices that Central African governments are known for. Moreover, it could allow investment flows into the country without touching the dollar or the local currency.

When asked why the Central African Republic did not simply use Bitcoin or the ultra-fast Lightning network for these purposes, Ly reiterated that Sango Coin is intended to serve as a token associated with the government project: it is not a general purpose currency.

Sango could allow better control of the flow of funds, thus reducing the risk of capital flight. In addition, the World Bank stresses that the country will not be able to develop its human capital without sustainably strengthening domestic revenue mobilization. Sango could be the quickest route to more robust earnings.

bitcoin on the ground

Paco De La India, known as Run with Bitcoin, recently spent two weeks traveling in the CAR in hopes of spending Bitcoin and interacting with Bitcoin. He told Cointelegraph:

There wasn’t even a single company that accepted bitcoin. I tipped my guide in Bitcoin. I paid my host in bitcoin.

Aside from these small successes, Paco told Cointelegraph that Bitcoin’s adoption in the field is minimal. In a country where less than a quarter of the country has internet access, a basic requirement to use magic money on the internet is hardly surprising.

As for the creation of Sango Coin, Paco suggested that there might be external forces at play. The CAR is extremely resource-rich, so why couldn’t a French public project meddle in the creation of the token? he asked. The token was indeed created quickly after state visits to one of the global crypto hubs, Dubai.

Ly explained that foreign influences had an effect on the decision-making process:

The idea for Sango Coin came from a Dubai-based private partner who discussed it with the head of state.

And an agreement has been reached with foreign investors, but there is no indication that the former colonial power is using Sango Coin to control the resources. It just might be the fastest way to raise capital and, as Ly suggested, use that capital to buy Bitcoin and build the country’s infrastructure.

Ultimately, the adoption of Bitcoin and the creation of Sango appear to be a ploy to inject much needed FDI into the country and improve the country’s position in the world. However, the creation of this token may avoid interest from the wider Bitcoin community, presumably front-line investors in places and jurisdictions that announce their plans for Bitcoin.

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