Conflict Bitcoin: Are cryptocurrencies the new digital blood diamonds of Africa?

May 2022 | Reuters

The Central African Republic (CAR) has become the latest country to adopt bitcoin as a national currency. The adoption follows a similar move in El Salvador last year, forcing significant fines and/or imprisonment on vendors refusing to accept bitcoin for payments. Many are confused by CAR’s sudden embrace of crypto. Afterall, El Salvador’s bitcoin baptism of fire is not going well. Despite fears of default, El Salvador’s already gambled over $340 million on the country’s new crypto payment system. And the gamble has flopped. A recent survey found that 86% of Salvadoran businesses have never carried out a transaction using bitcoin. According to author David Gerard, CAR, the world’s second-poorest country, is nowhere near ready for crypto-payments. “El Salvador is a gleaming jewel of functionality by comparison”, he said.

Some analysts claim the adoption of crypto in CAR is just a big middle finger to international finance institutions, like the IMF and foreign-owned money transmitters. But unlike El Salvador, CAR does not have a large pool of diaspora working overseas getting stung with remittance fees when sending money home. So, CAR must be trying to attract crypto-rich investors? Unlikely. Land-locked CAR lacks the beautiful beaches and other trappings boasted by crypto hot-spots elsewhere. CAR is also among the world’s worst countries for internet access. What about opportunities for bitcoin mining with cheap renewables? Nope. Only 14% of CAR’s population has some access to electricity. Over 90% rely on foraged wood and charcoal for cooking and heating.

CAR’s bitcoin bombshell highlights President Faustin-Archange Touadera’s lack of crypto knowledge and Tik Tok talent. Salvadoran President Nayib Bukele’s makes his crypto proclamations with fanfare and fireworks. Touadera’s announcement featured a scanned copy of a press release, teeming with typos and posted on the President’s Facebook page. An odd notice board for such far-reaching and immediate legislation. CAR’s former Prime Minister, Martin Ziguele confirmed the country’s crypto law was a rushed proclamation. But President Touadera claimed the disruption was necessary to “improve the conditions of Central African citizens” and distinguish CAR as “one of the world’s boldest and most visionary countries.”

Like most places attracting crypto evangelism, CAR is a human rights bomb site. Human Rights Watch and UN experts recently reported that since 2019, Russian fighters have been torturing, raping, and executing civilians across CAR with complete impunity. One Central African out of four is internally displaced or is seeking refuge abroad. CAR’s government relies on foreign military assistance to keep control, including that provided through the Wagner Group, a private military security contractor controlled by Yevgeny Prigozhin, a Russian oligarch with close ties to Vladimir Putin. Prigozhin’s covert ‘Little Green Men’ were recently implicated in assassination attempts against Ukrainian President Volodymyr Zelensky. The Wagner Group are also deployed in under-the-radar military operations across at least six African nations. According to General Stephen Townsend, the commander of US armed forces in Africa, “[Wagner] essentially run the Central African Republic” and are a growing force in other African countries.

Bitcoin has supported Russian soft-power in Africa for some time by enabling Russia to fund covert operations anywhere despite sanctions. As well as Russian mercenaries, Prigozhin also oversees the social media meddling efforts of the Internet Research Agency, an organisation prosecuted in the US for election interference. Participating political ‘activists’ are paid for their assistance using cryptocurrency to ensure maximum off-the-books deniability. Likewise, Prigozhin’s ‘grassroots’ organisation, AFRIC, pays African ‘Agents of Influence’, using privacy-preserving alt-coins like ZCash and Monero.

As well as enabling Russia’s expanding influence in Sub-Saharan Africa, cryptocurrencies are putting the brakes on decolonisation in the disputed territory of Western Sahara. The sparsely populated country bordering the Atlantic Ocean is Africa’s last colony. Spain sold it to Morocco in 1975 in exchange for continued access to Western Sahara’s fisheries and profits from a phosphate mine.

Since 1979, the International Court of Justice has pushed for a referendum on independence for the Indigenous Saharawis. But Morocco invaded, using napalm against fleeing Saharawi refugees. Morocco uses bitcoin mining developments to entrench their occupation. Morocco recently gave the green-light to Soluna, a US blockchain company, to develop a massive 900-Megawatt bitcoin mining operation in the Saharawi region of Dakhla. According to Western Sahara Resource Watch, by setting up shop in the region, bitcoin miners are “strengthening Morocco's belief that it can violate international law and human rights”.

Despite reported “crimes against humanity” at the hands of paramilitaries in Ethiopia, blockchain developers behind the Cardano cryptocurrency are working with them to develop digital-surveillance systems, including a blockchain-based ID platform and national records system. The developers hope to expand this, incorporating an Ethiopia-wide cryptocurrency payment network, before connecting the entire African continent together with Cardano infrastructure.

Though poor, Ethiopia, Western Sahara and CAR are rich in precious resources. Back in colonial times, to profit from these places, European powers and their private companies capitalised on local conflict. More blood meant easier access and bigger returns. Consumer boycotts on ‘blood diamonds’ were called for. But these were cooled down by those benefitting from a violent status quo. Our research shows that across the world’s troubled spots, resource wars and economic crises are the ideal conditions for globally trading a new kind of high-tech blood diamond. And the solution to these conflicts fuelled by crypto, is to boycott bitcoin.

A version of this post was published by Thomson Reuters Foundation News.