The economy today

Will the bitcoin debacle jeopardize projects in the Central African Republic and El Salvador?

Audio 04:17

El Salvador has become the first country in the world to adopt bitcoin as its national currency, alongside the dollar (photo illustration).

© REUTERS/Dado Ruvic

By: Dominique Baillard Follow

4 mins

For the past few days, the fall of cryptocurrencies has been dizzying.

This sudden rout could sound like a warning in El Salvador and the Central African Republic, two countries where bitcoin has become an official currency.

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Bitcoin has lost 70% of its value since October.

, this means that the reserves of crypto currencies acquired in the fall have melted by more than half.

Their value today is less than the price paid to acquire them.

A non-event for the Minister of Finance: these reserves, he said, represent only 0.5% of the national budget, so there is no danger in delay.

Yet this bitcoin crash impoverishes the six million Salvadorans who took their president's advice and bought cryptocurrency.

By falling even faster than the stock market, the famous cryptocurrency has demonstrated that it is mainly used for speculation

With such volatility, bitcoin cannot be taken seriously as an instrument of stores of value, i.e. a means of saving.

And even less a means of payment with a possible difference in value between the moment of the transaction and its concrete realization.

Bitcoin therefore performs only one of the three functions assigned to a currency.

These facts were already established before this descent into hell.

And that hasn't stopped these two countries from embracing bitcoin.

Because it appears as a providential, magical response to their financial distress.

At the moment, El Salvador is on the verge of default.

El Salvador's economy has been fully dollarized for about twenty years.

With its bitcoin city project, a bitcoin free zone, El Salvador dreams of changing the economic situation, of getting out of this dependence on the greenback.

Bitcoin should promote the country, restore its image tarnished by crime and thus attract investors and tourists.

► To read also: Cryptocurrencies in ten key questions

In March, a public company issued bitcoin debt equivalent to $1 billion.

It is also the equivalent of the amount that the IMF refuses to lend to it for lack of a program to fight against corruption and bad governance.

Remittances from the diaspora fuel a quarter of GDP, and sending it in bitcoin apparently costs less than going through official bodies charging exorbitant fees.

This has not yet convinced the emigrants.

Only 1.6% of transfers were made

the digital vault in the first quarter of this year.

The Central African Republic, too, is seeking to regain control of its monetary destiny with bitcoin

According to the economist Olivier Vallée, it is the model of the Venezuelan petro that inspires him.

The petro has allowed President Maduro to regain a margin of freedom from the threats of the American treasury.

The philosophy of bitcoin is based on decentralization and its ability to overcome a third party, in this case a central bank.

In the case of the Central African Republic, on the contrary, it is a matter of building a centralized virtual currency whose price is fixed in relation to the CFA franc.

But Bangui is now exposing itself to sanctions from the authority it would like to escape: the BEAC.

The Bank of Central African States has banned cryptocurrency transactions in the CEMAC zone and can punish recalcitrants.

President Touadera also cherishes the dream of making his country a

regional bitcoin

The Sango, the name of the project of a "crypto island", would be the African capital of bitcoin.

Due to a lack of sufficient electrical resources, the “mining” should be done in Dubai.

In this country where access to electricity and internet is reduced to a minimum, the technical feasibility seems very uncertain.

The current fall of bitcoin makes this project of monetary independence even more unlikely.

► IN BRIEF

In Australia, the oil giant BP is investing in the largest renewable energy plant in the world

Cost of the project: 36 billion dollars.

The Pilbara site, on the west coast of Australia, must generate 26 gigabytes of solar and wind energy, or the equivalent of around half the capacity of the French nuclear fleet.

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• Cryptocurrencies

• salvador

• Central African Republic