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Alternative Solutions Emerge as Central African Republic’s Cryptocurrency Dreams Face Challenges

As the Central African Republic (CAR) struggles to make its ambitious cryptocurrency project, Sango, a reality, experts are highlighting concerns over the complex and untested design of the coin.

Fiscal Risks Abound

The legal treatment of Sango Coin is unclear, leaving questions over whether it should be treated as debt or liability of the state. Without clarification on these issues, there are concerns that future revenue streams from natural resources could be pledged for the purposes of the Sango coin issuance, creating implicit guarantees by the State.

Uncertainty Surrounds Valuation

The design of the Sango coin also creates uncertainty regarding its valuation. As it is issued on a sidechain to the Bitcoin blockchain with a two-way peg mechanism, the Sango coin would inherit Bitcoin’s high volatility, making it a highly speculative asset. The lack of clarity over whether the Sango Coin is fully or partially backed by Bitcoin raises concerns about potential de-pegging and devaluation.

Alternative Solutions Emerge

As the challenges surrounding Sango become more apparent, alternative solutions are emerging as viable options for CAR’s economic development.

  • Exploring other digital currencies with more established designs and regulatory frameworks, such as stablecoins or central bank-backed digital currencies (CBDCs)
  • Focusing on blockchain-based solutions that can help improve transparency and efficiency in the country’s financial sector without relying on a cryptocurrency
    • Blockchain- based payment systems could enable faster and cheaper transactions for citizens, while also reducing the need for physical cash

Conclusion

While Sango may have ambitious goals, its complex design and untested nature raise concerns over its viability and potential fiscal risks. As CAR continues to navigate the challenges of developing a cryptocurrency, experts recommend exploring alternative solutions that can provide similar benefits without exposing the country to unnecessary risks.