Central African Bank pushes back on Central African Republic’s adoption of Bitcoin

After the Central African Republic recognized Bitcoin as legal tender without consulting its regional monetary authority, the Central African bank is cracking down on Bitcoin transactions.

The Bank of Central African States which already does not recognize cryptocurrencies is now prohibiting all banks from cooperating with digital currency payment platforms or recognizing them as assets.

The Banking Commission of Central Africa (COBAC), which oversees the banking sector in the six-nation Economic and Monetary Community of Central Africa (CEMAC), said the restriction was necessary to maintain financial stability.

Back story

The Central African Republic’s presidency announced on April 27 that bitcoin had been approved as legal tender, making it only the second country to do so after El Salvador.

  • The government of the Central African Republic claims that Bitcoin adoption will assist the country’s economy to recover and flourish, as well as stabilize the country, which has been decimated by a decade-long civil war.
  • Opposition parties, on the other hand, criticized the administration for deciding without contacting the regional central bank, which oversees the common currency of six countries, including the Central African Republic.
  • The International Monetary Fund has also stated that the adoption of Bitcoin as legal tender by the Central African Republic presents several challenges.

What you should know

After accusing the Central African Republic of breaching a decades-old agreement to share a common currency with five of its neighbours when it embraced Bitcoin last month, the regulator is toughening its stance.

  • The CFA Franc is used in Cameroon, Chad, Equatorial Guinea, Gabon, the Republic of Congo, and the Central African Republic.
  • According to a statement seen by Reuters on Friday, the banking commission conducted a special meeting on May 6 to evaluate the impact of cryptocurrencies in the zone.
  • “To guarantee financial stability and preserve client deposits, COBAC recalled certain prohibitions related to the use of crypto-assets in CEMAC,” it said.
  • The holding of cryptocurrencies of any type, the exchange, conversion, or settlement of transactions involving cryptocurrencies, and the use of cryptocurrencies as a way of appraising assets or liabilities are all prohibited, according to the report.
  • “COBAC has decided to take several measures aimed at setting up a system for identifying and reporting operations related to cryptocurrencies,” it added.

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