Market News

• Central African Republic’s move backfires on regional banks
• The African nation adopted Bitcoin as legal tender last month

A regional central bank is clamping down on Bitcoin transactions after the Central African Republic adopted the cryptocurrency as legal tender without consulting its monetary authority.

The Bank of Central African States, which already doesn’t recognize cryptocurrencies, is now preventing all lenders from partnering with payment platforms that transact in digital currencies or from recognizing them as an asset. 

Lenders must also monitor any indirect attempt by their customers to make cryptocurrency transactions so authorities can take action, according to a May 6 note to banks sent to journalists on Friday.

“It is necessary to take preventive measures to ensure financial stability and protect client deposits within the region,” Central Bank Governor Abbas Mahamat Tolli said in the note.

The regulator is toughening its stance after accusing the Central African Republic of breaking a decades-old agreement to share a common currency with five of its neighbors when it adopted Bitcoin last month. Cameroon, Chad, Equatorial Guinea, Gabon, the Republic of Congo and the Central African Republic all use one of two variations of the CFA Franc. 

The $2.3 billion economy became the second to adopt Bitcoin as legal tender after El Salvador, which lost about $40 million on its Bitcoin holdings since September as of Thursday. 

While the African government said Bitcoin would spur economic growth and help to stabilize the war-torn country, the central bank has condemned the measure, adding to criticism from the International Monetary Fund, which said the decision raised major legal and transparency concerns.