Central Africa Republic Enacts Cryptocurrency Law
By Ferdinand Doh Galabe, Esq.
After procrastination from the Central African Financial Market Supervisory Commission (COSUMAF) and other CEMAC member states on the adoption of a legal framework to regulate cryptocurrencies in Central Africa, the Central Africa Republic (CAR) has recently adopted a law on cryptocurrencies which was promulgated on April 22, 2022 by its head of state Prof. Faustin Archange Touadera.
The Central African Republic is the second country in the world to legalize cryptocurrency after El Salvador last September. At the time the International Monetary Fund (IMF) had denounced El Salvador’s decision as dangerous for “financial stability, financial integrity and consumer protection”.
It must be said that there was anticipation of the adoption of such a law in Cameroon after Cameroon’s Ministry of Telecommunications announced in early 2021 that it was working on a white paper on the regulation of cryptocurrencies and crypto-assets in Cameroon.
It turns out that CAR has gone ahead of the member states of CEMAC and COSUMAF itself to enact a cryptocurrency law, although all of them have a common monetary policy and one central bank which enjoys, per the applicable central banking law (the UMAC Convention of July 5, 1996; the November 23, 1972 (amended on April 12, 1975), Convention on Monetary Cooperation between UMAC (CEMAC) member states and the Republic of France; the BEAC Operations Account Convention dated January 5, 2007, revised on October 3, 2014; and the BEAC Charter as revised in June 2017), the exclusive privilege of issuing the currency of the CEMAC monetary union (Monetary Union of Central Africa – UMAC) and issuing of bank notes and coins.
Article 10 of the law recognizes cryptocurrency as legal tender in CAR and obliges economic actors to accept payments in cryptocurrency when they are offered for payment of goods and services. Better still, all financial obligations in FCFA (XAF) which were due on the date of entry into force of the law can now be discharged by cryptocurrency payments.
To guarantee the credibility of cryptocurrency, the government of CAR has guaranteed that it will provide alternatives which permit users of cryptocurrency to benefit from the automatic and instantaneous convertibility of their cryptocurrencies in the currency that is used in CAR (XAF). The law, however, indicates that the modalities for the guarantee of the convertibility of cryptocurrency are to be laid down in a special regulation.
Also, the law provides that prior to the entry into force of the law, the government of CAR must guarantee the automatic and instantaneous convertibility of cryptocurrency to XAF through the Central Bank by creating a Trust.
According to the above-mentioned 22 April 2022 crypto-currency law, a cryptocurrency is a digital currency issued peer-to-peer (digital asset), without the need of a central bank, based on a block-chain and usable through the means of a decentralized computer network. On the other hand, block-chain is defined as a chain of blocks consisting of records of continuously generated data, in the form of blocks linked together in the chronological order of their validation, each block and its sequence being protected against modification
Bitcoin has been earmarked by the CAR law-maker as the cryptocurrency of reference which lays down the legal framework and the modalities for the implementation and the securing of cryptocurrency transactions, as well as criminal offenses, sanctions and means of proof of offenses. The legislator has tried to avoid conflict between this law and the regional community law by stating the obvious that regional community law has precedence over the law.
The law regulates all online commercial activities related to cryptocurrency, the activities of all persons who offer access to cryptocurrency services to the public by means of information and communication technologies, the activities of persons who offer services by means of block-chain technology which give rise to smart-contracts to procure goods or services.
The law governs all transactions which are related to cryptocurrency in whatever way which take the form of a purchase, withdrawal or sale.
Per the law, the exchange rate between cryptocurrencies and the CAR currency (XAF) is freely fixed by the market and all electronic transactions in CAR may be expressed in cryptocurrency legally recognized and regulated by rules. The lawmaker has permitted taxes to be paid by cryptocurrency, provided that the platforms which are used for such payments are recognized and authorized by the state. Moreover, cryptocurrency transactions are tax-free.
To ensure that there is order in the cryptocurrency market, the law has equally provided for the creation of a regulatory agency known as the National Agency for the Regulation of Electronic Transactions (NARET). Its principal function is to control and manage public ATMs installed by the state on its territory.
The violation of the provisions of the law are severely punished with imprisonment of 10 to 20 years and/or with fine of from 100 million FCFA to 1 billion FCFA. Analysts and crytocurrency specialists raise different concerns about the legalization of cryptocurrency as legal tender, including, among others, risks of facilitating money maundering and financial crime, because of the anonymity inherent in the use of cryptocurrency, its ability to circumvent financial regulations and the lack of oversight by central banks.
All persons who are involved in cryptocurrency transactions in CAR have up to thirty (30) days from the entry into force of the law to comply fully with the new cryptocurrency law.
You can access the CAR cryptocurrency law here: LAW_ON_CRYPTOCURRENCY_IN_CENTRAL_AFRICA_REPUBLIC_1651237143.
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