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Sango Coin: Post-colonial CAR and the State of Crypto

As the Bitcoin revolution reaches the level of the nation state, we look at the current trends in crypto-currency worldwide, with a particular focus on Africa.


Blake Lovewell
21st Century Wire

The Central African Republic (CAR for short) has been independent of colonial rule for 62 years. It is one of the richest nations on Earth, replete with abundant natural resources; oil, coal, uranium for energy, gold, silver and copper for industry, as well as some of the world’s largest diamond mines and most productive arable lands and lumberyards. It also has the Congo River which offers abundant hydro-electric energy. Yet, it is still a desperately poor country in human and socioeconomic terms. It has some of the very lowest economic indicators in the world – high infant mortality, and civil wars which keep CAR in a perpetually dire condition. Its people, instead of being able to relish the Edenic land they were born into, have instead been enslaved, having had their lands pillaged. It’s a nation which has been largely discarded following generations of colonial exploitation over the last few centuries.

As far back as the 1600s, the local currency has been debased by European travellers. Akori beads, delicate beads of high quality design and rare metals, were once widespread as a legitimate currency among African traders. Their source was unknown, but thought to be in Ghana, while some speculate that the most valuable beads were from meteoric metals. These fine beads functioned for 2,000 years as a medium of exchange throughout Africa. Then, when European travellers arrived with cheaply produced factory beads, they were able to, in effect, buy the whole country. Their exploitation ran so deep that these beads were forever tarnished and are now referred to as ‘slave beads’. For decades, the price of a central African slave was measured in beads. And after tumultuous road to CAR independence, not much has changed. The government is still today deliberately weakened by outside forces who in a mafia like fashion, continue the resource-plunder unabated.

This is the picture of an African country, exploited by Europe, now mired in poverty. It is sad, but all too common tale. Yet, there’s something new happening in CAR. Now the eagle-eyed news scourers may have seen talk of a Bitcoin law being passed in CAR’s legislature this April. The government had announced deliberations to follow the path of El Salvador in Central America, by adopting Bitcoin crypto currency as legal tender. This means the state would provide infrastructure for the use of Bitcoin in private and public transactions. This radical move would allow the 50% of the population who have no bank account to have some access to goods and services. On another level it could allow the State of CAR to slip out from under the US-dollar dominated economic hegemony – those vultures at the IMF, World Bank and Bank of International Settlements. I will not paint Bitcoin as purely a panacea as it has its own flaws. For example, digital infrastructure will be a major challenge, as many in CAR don’t have access to computers, phones or internet. Also, the day-today volatility of Bitcoin can make pricing parody hard to track, which means that holders could experience uncomfortable fluctuations in the price of certain goods and services. Despite all of this, it is well worth exploring alternative avenues for a country that has been utterly failed by the dominant system.

IMAGE: CAR’s new Sango Coin.

However, as with many new bitcoiners, CAR was lured in by an alt-coin promising even bigger benefits than mere Bitcoin. CAR’s president was wooed by a pair of controversial crypto personalities, Brian Armstrong of Coinbase fame, and Sam Bankman Fried. They worked with the office of President Touadéra to create Sango Coin. Named after one of the nation’s languages, Sango Coin was to be a national currency. Not just a centralised currency controlled by the state, it would be tied to CAR’s abundant natural resources.

Like so many other such alt-coin projects in the crypto-currency sphere, Sango Coin appears to have been over-hyped and pumped up as a potential boon for speculators. This week saw the CAR’s official launch of Sango Coin, but so far, the initial offering was not as successful as its designers would have hoped, recording only $1.09 million in the first 24 hours.

The marketing pitch should be familiar by now. Sango’s sleek website invites you to join the elite club of coin holders. If you buy in early you enter a draw to win plots of actual land in Africa. Furthermore, if you invest $60,000 USD equivalent today, you can earn yourself CAR citizenship. They even went as far as promoting a new ‘Crypto Island’ on the River Congo, a new hub for the tech industry. Yet, you have to marvel at the innovation here. Certainly, it’s one of the most bold crypto offering yet.

Yet, the small print was never very clear. Many questioned how natural assets would be tied into the blockchain. If it mirrors Wall Street’s ‘Natural Asset Corporations’, a central pillar of the globalists’ Green New Deal and Great Reset plans, then it does not bode well. This does seem ripe for exploitation by those same colonial powers of yore. Unfortunately, the Sango project didn’t open up its books for people to check the distribution methods of the coin and did not readily gain much trust internationally. Furthermore, Sango Coin was never a ‘proof-of-work’ currency like Bitcoin. Here we must take a small diversion into nerd territory, but hold on to your thinking caps, it’s worth learning.

In Bitcoin, new coins are created by miners. They exert an amount of energy to solve a complex sum then enter that into the global database, the blockchain, of Bitcoin. Thereby proving who created and owns that coin. It is an expense to buy energy to mine Bitcoin, but the intrinsic value of a Bitcoin as a scarce and provable digital asset, gives it a higher market price. You can therefore think of Bitcoin as an energy currency. Similar to that proposed by Henry Ford 100 years ago:

“Under the Energy Currency [Bitcoin] system the standard would be a certain amount of energy exerted for one hour that would be equal to 1 USD. It’s simply a case of thinking and calculating in terms different from those laid down to us by the international banking group to which we have grown so accustomed that we think there is no other desirable standard. – Ford, NY Times 1921

Ford could see the ills being exerted on the world by a small cadre of financial elites during the Great War. His forward-thinking idea would come to fruition a century later, with batteries ‘hash machine’ computers all helping to facilitate an endless stream of blockchain transactions. Ford believed this type of ‘Energy Currency’ would level the global playing field. Suddenly CAR, with abundant power generating capacity, could become self-sufficient and take its rightful place high-up in the global economy. Those states in Europe would have to provide some useful service in return for their energy currency, rather than simply print pounds, euros or dollars which decline in value year-on-year.

The model of an energy currency, where you prove your work and earn a hard currency asset in return, is working for Bitcoin. It generates a hard asset that is verifiable from Brussels to Burkina Faso. Proof-of-work is arguably the most important aspect of Bitcoin’s value. In contrast, Sango Coin was designed to be ‘proof-of-stake.’  That means that whoever owns the coins has a say over the minting process. There are no miners, no work required – it is simply a token. Thus, the state would control the creation of new coins, decide how the coin was regulated, and could change those conditions whenever it wanted to. It was too sweet of an offer for President Touadéra to refuse. He could build his own currency from scratch. He was, in my opinion, blinkered to the cold realities of such a project. The government never made it clear how the nations resources would be tied into the currency, or how it would fit in with prior statements on Bitcoin, and it would not publish much of the technical information of Sango Coin. This opacity may be its undoing, and I believe could lead to the failure of the project.

No wonder then that the reception for Sango coin has been frosty. On its opening day, it has only sold 5% of the first mint. Usually, if a crypto product is healthy it will sell-out and begin to appreciate in price as more people demand the limited supply. With just over $1million of its $21 million available sold, it tappearso have fallen way short of its creators’ expectations. It seems even the irresistible offer of cheap land couldn’t sway many buyers. It looks like, for now, CAR’s dream of a crypto-boom is just a mirage. But these are early days in this novel economic sphere, and I hold out hope that as time progresses, the understanding of these technologies will develop and begin to emancipate people from economic tyranny.

It seems that everywhere whether we look in the Bitcoin space, or the stock market, we find the common thread. Misunderstanding the technology leads to mistakes and malfeasance. The 2007 Lehman Brothers collapse was brought about by a conglomeration of nested investment products. Packages of mortgage debts, re-bundled and laundered through corrupt rating agencies, lead to a spiraling bubble in sub-prime debts. This complex lattice of derivative products formed a smokescreen behind which nefarious actors could make a quick buck and leave. Ultimately, nobody was jailed because the scam was so complicated, nobody could be implicated directly. Sadly, this occurs just as easily in the crypto-currency sphere.

De-Fi and Tumbling Bitcoin

In the last month, the price of Bitcoin has more than halved. The total market capitalisation of all crypto-currencies has also halved. Now there are many causes of this decline in price. Some exogenous causes, from outside of the system can certainly be implicated. The general negative economic environment mean there is less easy money around and some people had to pull out their recent investments in crypto-currency. And some causes of the price fall are endogenous. For one thing, Tesla liquidated 75% of its Bitcoin holdings to cover its running costs for this year. This created a large sell pressure as supply increased rapidly. However, more integral to the drop is the de-fi collapse; in particular the case of Celsius.

‘De-fi’ is short for decentralised finance. It refers to any financial activity which takes place using decentralised tokens and networks – those largely made up of individuals and small companies. To some it offers a great hope for a future of banking free from centralised control and censorship. Others see a Wild West, where under-regulation leads to a plethora of scams and swindles. As the economic outlook worsened, the de-fi space was hit hardest. It relied on lots of fresh investment and saw a huge boom riding on the back of crypto-currency’s latest ballooning. Yet when those lines of liquidity (money) dried up, the house of cards stacked atop tumbled down. Amongst the many companies who have dissolved or broken down recently, it is Celsius which typifies the problem most clearly.

According to Celsius’ website, the company was dreamed up on the back of a napkin in 2017. By 2018 they had formed a company and launched a new token, known as CEL. The CEO, Alex Mashinsky, had been a successful entrepreneur in other financial products, and brought a cult-like following to the company. What Celsius offered was a place to save your money outside of the bank, and a place to invest your money outside of the stock market. It would be the middle man allowing somebody with Bitcoin holdings to offer them up for loans, without having to sell them. This is an attractive prospect for those seeking to avoid the taxable event at the point of sale of the Bitcoin asset. The owner could then claim the interest on the loan. Similarly somebody could take out a loan of Bitcoin, use it for investment, and return the original amount plus interest, without having to have a lot of money to start with. It seemed like a win-win, and many regular people began to pile in seeking to garner some easy profit.

Yet it was too good to be true. Earlier this year, there began rumblings among some investors that Celsius was not being clear with what they were doing with people’s investments. It turns out they had been undertaking shady activities. They had invested in high-risk companies, some of which collapsed. They also were gaming their own token: pumping up the price and selling off their own private holdings. All the while they were making spurious claims about how secure their service was, and downplayed the huge risks they took. The company had started with honest intentions but came to embody the worst of legacy finance institutions, corruption, obfuscation and outright crime. What began as a decentralised lending platform had grown into an unregulated bank and an unregistered high-risk hedge fund both of which are highly illegal.

It all came to a head when investors tried to pull out their money and withdrawals were stopped. Celsius had to declare bankruptcy and is going through the process of administration. They still refuse to declare how big the black hole in the balance sheet is. Investors, who were lured in by the promise of easy profit and the crypto-currency dream of escaping the banksters, were betrayed. Some larger investors, even upon doing due diligence, could not see any warning signs until it was too late. The complex structures involved in these de-fi products make it very unclear where the risk truly lies. There have even been cases of suicide due to retirees having gambled and lost their pensions on this scheme. Doubtless Mashinsky will face his day in court, but it is little comfort to those who lost their life savings and won’t get them back.

Tying these stories together, that of CAR and their initial folly into Sango Coin, and those who lost out when the mirage of Celsius’ easy profit disappeared into thin air – shows that it is hard for many to gain a clear understanding of how this space actually works. These cases demonstrate that the biggest thing hampering crypto-currency adoption is lack of knowledge. As with all technologies, they start with a few people who understand it, and slowly filter out into the general population. We are still early.

We have seen Bitcoin adopted as legal tender in El Salvador, which has shown some strength, and may develop some resilience as time goes on. It has certainly captured the attention of South America, who remembers well the tyranny of the US dollar. We also see that Russia is prepared to accept Bitcoin in trade for some commodities, including oil and gas, which could expand in utility with its allies China and Turkey. International financier Christine Lagarde has publicly opined about the use of Bitcoin as an escape valve or loophole for people and nations to escape the yoke economic sanctions and financial tyranny. The Bank of International Settlements, the cadre who pulls the strings at the world’s central banks, have tried to downplay Bitcoin as just another Dutch Tulip: a meaningless asset with no intrinsic value. Yet, millions of people around the world use Bitcoin to cheaply send money home to their family, millions of businesses around the world accept it for payments and nation states themselves hold it in their reserves alongside other hard assets like gold. Even Lagarde’s own European Central Bank admits it will one day have Bitcoin held in its vaults.

So the state of crypto-currency today is… we’ll have to wait and see. There is huge hope for that emancipatory blockchain. There also is fear and uncertainty about its future. One thing is for sure, it’s not going away, and it gets more interesting by the day. It is my belief that as the level of understanding about this new technology increases, so will its usage and concurrently so will the benefits. The proof-of-work nature of Bitcoin – an energy currency, is one of the great innovations of the technological era. It offers an alternative to centralised currencies which are subject to the whims of their overlords and which have been used globally as tools of oppression.

Somehow Bitcoin retains a mystique, despite everybody having heard of it. Yet, once it breaks out of its cage, there’s no telling how far the Bitcoin revolution will run.

Listen to Blake Lovewell discuss the CAR and crypto in Africa on TNT Radio:

References:

A brief history of Akori Beads in Africa [Afrikapital.org]:
https://www.afrikapital.org/p/akori-beads-hyper-inflation-and-ancient

Overview of Natural Asset Corporations [Children’s Health Defense]:
https://childrenshealthdefense.org/defender/wall-street-new-york-stock-exchange-natural-asset-company/

Henry Ford’s Energy Currency [Cryptonews & NY Times]:
https://cryptonews.com/exclusives/henry-ford-s-energy-standard-a-100-year-old-bitcoin-predicti-8313.htm

CAR’s Sango Coin flops on mint day [Reuters]:
https://www.msn.com/en-ca/money/topstories/central-african-republics-digital-coin-finds-few-buyers

Alex Mashinsky Biography [Fortune]:
https://fortune.com/2022/06/13/who-is-celsius-ceo-alex-mashinsky-crypto-crash/

Russia to accept Bitcoin for Oil and Gas among allies [Business Insider]:
https://markets.businessinsider.com/news/currencies/russia-bitcoin-oil-gas-friendly-countries-china-turkey-energy-minister-2022-3

Bank of International Settlements recent paper on Crypto [BIS]:
https://www.bis.org/publ/work1013.pdf

SEE MORE BITCOIN NEWS AT: 21st Century Wire Bitcoin Files

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