CAR’s Sango Coin Faces Uncertainty and Credibility Concerns

The Central African Republic (CAR) has launched Project Sango, an ambitious initiative aimed at transforming the country’s economy through cryptoization. The project’s centerpiece is the Sango coin, a national digital currency advertised as being backed by Bitcoin. However, experts have raised concerns about the coin’s design, valuation, and legal treatment, casting doubt on its credibility.

Uncertainty Surrounds Sango Coin Design

The Sango coin’s concept is complex and untested, blending features of private and public digital money. It does not satisfy the standard definition of a Central Bank Digital Currency (CBDC), nor can it be classified as a stablecoin due to Bitcoin’s high volatility. The coin also falls within the Financial Action Task Force (FATF) definition of virtual assets.

Legal Treatment Raises Fiscal Risks

• The legal treatment of Sango Coin is unclear, leaving open questions about whether it should be treated as debt or liability of the state.
• If not recognized as a direct liability, there are significant fiscal risks to consider, including potential contingent liabilities and implicit guarantees by the state.

Valuation Uncertainty Creates Speculative Asset Concerns

The Sango coin’s valuation is uncertain due to its two-way peg mechanism with Bitcoin. This means it would inherit Bitcoin’s high volatility, making it a highly speculative asset. The extent to which the Sango Coin is backed by Bitcoin is also unclear, leaving investors at risk of “de-peg/devaluation” vis-a-vis Bitcoin.

Experts Question Credibility

The Sango project’s credibility has been questioned due to its complex and untested design. Experts have raised concerns about the coin’s ability to function as a reliable means of payment and store of value. The project’s lack of transparency and unclear legal treatment only add to the uncertainty surrounding Sango Coin.

Alternatives to Consider

• In light of these concerns, it may be worth exploring alternative digital currency solutions that are more transparent, stable, and legally clear.
• The CAR government would do well to re-evaluate its approach and consider options that prioritize stability and credibility over speculation and uncertainty.

Conclusion

The Sango project’s uncertain design, valuation, and legal treatment raise serious concerns about the credibility of CAR’s national digital currency. As the project moves forward, it is essential for stakeholders to address these issues to ensure a stable and reliable means of payment and store of value for the people of CAR.