1. Introduction
In the context of rapid global digital transformation, digital currencies, especially Bitcoin, have emerged as a new option that challenges traditional monetary systems. These currencies have become an attraction for developing countries facing significant economic challenges such as weak financial inclusion, high remittance costs, and a lack of monetary independence.
The experiences of both El Salvador and the Central African Republic are the first official attempts to adopt Bitcoin as legal tender within a country with an unstable economy. However, these experiences revealed a deep gap between economic ambitions and sovereign and technical reality.
2. El Salvador: the first legal experiment with Bitcoin
Economic context:
El Salvador has relied on the US dollar since 2001.
About 25% of GDP comes from remittances from abroad.
A high percentage of the population is outside the formal banking sector.
Adoption objectives:
Reducing the costs of financial remittances.
Enhancing financial inclusion through the "Chivo" application.
Attracting digital investment and tourism.
Achieving relative monetary independence.
Challenges and initial outcomes:
The use of Bitcoin in daily transactions has been limited.
A significant decline in the value of state investments in Bitcoin (losses estimated in the hundreds of millions).
Citizens' hesitation due to significant price fluctuations.
International institutions' stance:
The International Monetary Fund has repeatedly warned of the systemic risks associated with this step.
The government was asked to reconsider the decision or make it voluntary rather than mandatory.
3. Central African Republic: ambition amidst fragility
Political and economic motivations:
A desire to liberate from the African franc supported by France.
Improving the country's international image and attracting digital investors.
Promoting the idea of a digital economy in an environment suffering from political and economic crises.
Weak infrastructure as a central obstacle:
Severe shortage of electricity and internet.
The absence of digital education and an appropriate legal framework.
The absence of a widespread culture of using digital currencies.
Absence of popular adoption:
There is no real interaction by the population with the digital currency.
No clear indicators of economic or social change were observed.
International criticisms:
The World Bank and the International Monetary Fund condemned this step as dangerous and unstudied.
It was considered that it could exacerbate corruption problems and the absence of transparency.
4. Comparative analyses
Item
El Salvador
Central African Republic
Another official currency
US dollar
The African franc (supported by France)
Adoption motivations
Remittances, financial inclusion
Monetary liberation, attracting investments
Digital infrastructure
Average to good
Very weak
International support
Limited, with warnings from the IMF
Almost nonexistent
Level of popular adoption
Relatively low
Very limited
5. Critical assessment
Bitcoin volatility as a risk to financial stability:
Bitcoin is a currency with significant price volatility, making it unsuitable as an official currency for fragile economies.
El Salvador experienced direct financial losses as a result of the decline in Bitcoin's price after significant government purchases.
The lack of appropriate regulatory tools in poor countries:
Most of these countries lack the necessary legislation to regulate dealings with digital currencies.
The absence of anti-money laundering and cybersecurity mechanisms increases security and financial risks.
The issue of transparency and accountability:
There were questions about how the funds allocated for the implementation of Chivo were spent.
The lack of transparency increased the loss of trust between the people and the government.
The technical limits to the success of any digital policy in an unprepared environment:
Without a strong infrastructure of internet and electricity, any digital transformation will have no practical effect.
Digital education is one of the most important missing elements in these experiences.
6. Conclusion and recommendations
Conclusion:
The experiences of El Salvador and the Central African Republic showed that adopting Bitcoin as legal tender carries significant opportunities and challenges.
Despite political and economic ambitions, sovereign, financial, and systemic risks remain too great to ignore.
Recommendations:
Accurately understanding the local context: any digital policy must be based on a thorough study of the infrastructure and local economic culture.
A gradual and studied strategy: instead of bold and unstudied steps, limited experiments or the adoption of central bank digital currencies (CBDCs) can be initiated.
Strengthening digital and educational infrastructure: providing electricity, internet, and digital education is the foundation for any digital success.
Cooperation with international organizations: working with the International Monetary Fund and the World Bank to establish a regulatory framework and appropriate monitoring mechanisms.
Focusing on transparency and accountability: ensuring transparency in spending and providing internal and external monitoring mechanisms.