One law, two economies, compulsory cryptocurrency acceptance in El Salvador and the Central African Republic

Introduction

El Salvador granted Bitcoin the status of legal tender in June 2021 and became the first sovereign State to confer such status on a decentralized digital asset. Ten months later the Central African Republic did the same. Both experiments have been studied from several angles since then, measured in their economic effects, explained in their political motivations and analyzed in their legal risks, and the two adopting countries have been compared with each other, which Kshetri did in September 2022 [17].

All that work shares a presupposition that none of its branches makes explicit, that the obligation at the center of both statutes, the obligation of every economic agent to accept the asset as a form of payment, was an operative norm whose consequences it is appropriate to measure. The present article examines that presupposition and finds that it does not hold.

The Central African provision reproduces the Salvadoran one almost word for word, and not only the provision but the whole sequence of six consecutive articles that accompanies it. This is not a coincidence of policy orientation, it is a legal text traveling between jurisdictions, and it means that both cases are not independent observations. I declare that dependence from the start and treat it as the object of the study instead of as a defect, because it allows observing what happens when the same instrument is applied on two economies that share almost nothing else.

Because what the two countries did not share is the consequence attached to the obligation. El Salvador attached none. The Central African Republic attached a penal clause of up to twenty years of imprisonment. In neither did the obligation operate.

The scientific novelty of the present research consists, then, in establishing that the operation of a monetary mandate does not depend on the severity of the sanction that accompanies it nor on the technical quality of the asset it imposes, but on the regulatory visibility of the population on which the obligation falls, and in showing that the same instrument, transplanted between two economies that differ in region, in monetary regime, in level of development and in institutional structure, was inoperative in both. The implication travels beyond the case at a moment when more than a hundred central banks are developing retail digital currency projects, given that the technical superiority of those instruments over Bitcoin does not modify this condition.

Section 1 builds the theoretical framework and identifies the gap, section 2 explains the method, section 3 documents the correspondence between both statutes and the two divergences that matter, section 4 examines whether the mandate operated in each country, and section 5 derives the implications and tests them against the Nigerian experience with the eNaira.

1. Theoretical Framework

1.1. The Diffusion of Monetary Policy Instruments

Governments do not design their policy instruments in isolation, and academic literature has documented that the adoption of a measure in one jurisdiction increases the probability that it is adopted in others, whether by emulation, by competition for mobile resources, by learning from the experience of others, or they believe they learn, which is not always the same thing, or by external coercion [10]. DiMaggio and Powell called mimetic isomorphism the process by which an organization that does not know how to reach an objective copies the practices of another it perceives as legitimate, and observed that it intensifies precisely when uncertainty about outcomes is greater [9].

The adoption of a cryptocurrency as legal tender creates, in this field, a special case. In June 2021 no sovereign State had granted such status to a decentralized digital asset, and the comparative review of foreign experience in matters of legal regulation of cryptocurrency shows models then ranging from prohibition to regulated tolerance [4]. No government that considered the measure had experience, its own or that of others, about how to construct the legal architecture it required. The first State that legislated copied nothing, given that there was nothing to copy. The second had at its disposal exactly one model.

Watson argued that the transfer of norms between legal systems is the principal mechanism of legal change, and that it often succeeds even between societies that share very few traits [26]. Kahn Freund objected that success depends on how far the transplanted norm is tied to the political and social structure of the country of origin, and that certain norms cannot therefore be transplanted at all [16]. The debate remained doctrinal until Berkowitz, Pistor and Richard gave it an empirical formulation, demonstrating that countries which received their legal institutions through transplantation obtain worse results in matters of legality, and that the difference depends not on the content of the norm but on whether the receiving country adapted it to local conditions, a phenomenon they call the transplant effect [6].

The relevance for my object is direct. If a monetary mandate traveled between two jurisdictions in a practically literal form, whether it operated in the second cannot be answered by examining the content of the norm, because that content is the same in both. It has to be answered by examining what the second jurisdiction had at its disposal in order to apply it.

1.2. Legal Adoption and Effective Operation

The analysis requires a distinction that the sociology of institutions established long ago and that literature on cryptocurrency as legal tender has not incorporated. Meyer and Rowan showed that organizations adopt formal structures responding to what their environment expects and afterwards keep those structures separated from what they effectively do, where the formal structure produces legitimacy before the observers that matter and does not govern the conduct it supposedly governs [21]. Levitsky and Murillo separated two dimensions of institutional strength usually treated as one, the stability of a norm over time and its enforcement, that is to say, the degree to which the conduct the norm prescribes corresponds to the conduct that actually occurs [18]. A norm can be perfectly stable and never enforced, and confusing the two is particularly costly when what is being studied is a norm promulgated with great publicity.

This allows separating four states that the study of these experiments usually collapses into one. In first place, the legal adoption of the instrument, which consists simply in promulgating the norm. In second place, its regulatory implementation, the administrative apparatus without which the norm cannot be applied, which includes designating a competent authority and establishing procedures of verification. In third place, enforcement, when somebody verifies compliance and imposes a consequence on whoever does not comply. And in fourth place, the effective use of the asset, the only one of the four that existing literature has measured with some systematicity. None of these states implies the next, and a policy can fail in any of them for completely different reasons.

1.3. Enforcement Capacity in Economies with High Informality

The condition that governs the third of these states has received attention from economic literature, although from a perspective different from mine. Ohnsorge, Okawa and Yu establish that a broad informal sector weakens the effectiveness of public policies and the capacity of the government to generate fiscal revenues [22].

Monetary literature, for its part, has studied informality in matters of the transmission of monetary policy, finding that informality weakens it and observing, with reason, that models for emerging economies usually ignore that a large part of the economy operates outside the formal system. But that literature refers to the capacity of the authority to modify the conduct of agents by modifying relative prices, through the interest rate and the exchange rate.

A monetary mandate does not operate through relative prices. It operates through a legal obligation, and a legal obligation produces effects only if the authority that dictates it can verify that it is observed and penalize the breach. The condition of enforceability depends on the regulatory visibility of the obligated population, and that visibility varies enormously between an economy with a predominant formal sector and one where most economic units operate outside every registry.

This condition has to be distinguished from a phenomenon that resembles it and is not the same. Holland documented that Latin American governments practice what she calls forbearance, the deliberate non application of norms before informal actors, and showed that it obeys an electoral logic and not an administrative incapacity [13]. The distinction matters because forbearance presupposes the capacity to enforce and the decision of not exercising it, while the situation I examine concerns an obligation whose addressees the State cannot even identify. Both produce the same observable outcome and are therefore difficult to separate from outside. Section 5 discusses which description corresponds better to the evidence of each case.

1.4. The Gap

Literature on the adoption of cryptocurrencies as legal tender has grown quickly since 2021 and from quite different perspectives. Empirical economic literature measured its effects on adoption and on the use of digital payments [5]. Political economy literature examined why the governments adopted the measure, characterizing it in terms of authoritarian governance and capture of public resources [7]. Legal literature analyzed the incompatibilities of the adopted frameworks, in particular the conflict between the Central African statute and the monetary order of the Communauté Économique et Monétaire de l'Afrique Centrale [15, 27]. And Kshetri carried out, in September 2022, the first comparative examination of the two adopting countries [17].

The possibility that the obligation of acceptance never governed the conduct of any economic agent, and that the documented outcomes therefore correspond to promulgating a norm and not to applying it, has not been examined until the present day. That gap constitutes, precisely, the scientific problem that the present research addresses.

2. Method

The present article takes as its unit of analysis not the country but the mandate, the legal provision that obligates economic agents to accept a cryptocurrency as a form of payment. This choice responds to the characteristic that makes both cases productive, where the provision adopted by the Central African Republic in April 2022 reproduces, in its terms and in the architecture that accompanies it, the one adopted by El Salvador in June 2021. I am not, then, before two independent instances of the same phenomenon, but before one instrument that traveled from one jurisdiction to another, and this determines what the comparison allows me to infer.

I declare this dependence from the start, given that a comparison of two cases that are not independent cannot sustain the claim that the second confirms the first one. What the transplant does allow is a different operation, observing what happens when the same normative instrument is applied on two economies that share almost nothing except the instrument. El Salvador is a dollarized economy of lower middle income, with a monetary authority deprived of policy capacity since 2001 but not subject to any supranational authority [2]. The Central African Republic is a low income economy, landlocked, member of the monetary union of Central Africa, where the currency is issued by a regional central bank and financial institutions answer to a supranational banking commission. The instrument is the same. The contexts are as different as they can be.

The dependent variable requires a precision that existing literature has not made. I do not seek to explain whether Bitcoin was used in these two countries, which is a question about the behavior of the population, but whether the mandate operated, that is to say, whether the obligation produced effects in the conduct it claimed to govern. The four states separated in section 1.2 are what this requires. The analysis examines the first three, given that the fourth has already been documented for El Salvador and cannot be documented for the Central African Republic with the available evidence.

The sources used are of four types. In first place, the primary legal instruments, the Loi n°22.004 régissant la cryptomonnaie en République Centrafricaine and the Ley Bitcoin [19, 20]. In second place, the regulatory acts of the supranational authorities, among which the Décision D 2022/071 of the Commission Bancaire de l'Afrique Centrale (COBAC) is the principal one [8]. In third place, the institutional evaluations that document implementation, where the mutual evaluation report written by the Groupe d'Action contre le Blanchiment d'Argent en Afrique Centrale (GABAC) occupies a central position [11]. And in fourth place, the empirical literature on the Salvadoran case, which provides the measurements of effective use that no equivalent source provides for the Central African one [5].

This asymmetry of evidence is the principal limitation of the present research and I prefer to declare it instead of resolving it rhetorically. For El Salvador there are representative surveys and blockchain data that measure adoption directly. For the Central African Republic there are none. I do not substitute this absence with indicators of digital infrastructure, given that inferring the non operation of a mandate from the conditions that predict it would be circular. What I do instead is examine the documentary evidence about implementation and enforcement, which exists for both cases and does not depend on the behavior of the population.

A second limitation concerns how I treat the absence of documented enforcement. That no sanctioning procedure appears in the reviewed material does not prove that none ever existed, it proves that none was documented in the legislative, regulatory and supervisory sources consulted. I indicate in each case which sources were reviewed, so the reader can evaluate the scope of that absence.

3. The Transplanted Mandate

3.1. The Correspondence of the Texts

Article 7 of the Ley Bitcoin, approved by the Asamblea Legislativa of El Salvador on 8 June 2021, establishes that every economic agent must accept bitcoin as a form of payment when it is offered to him by whoever acquires a good or a service [19]. Article 10 of the Loi n°22.004 régissant la cryptomonnaie en République Centrafricaine, promulgated in Bangui on 22 April 2022, establishes that every economic agent is held to accept cryptocurrencies as a form of payment when they are proposed for the purchase or the sale of a good or a service [20].

The correspondence between both provisions does not operate at the level of policy orientation, which would be a trivial observation, but at the level of the sentence. The obligated subject is the same and is called by the same expression, the economic agent. The verb of obligation is the same. The object is the same, acceptance as a form of payment. And the conditional clause is the same. The divergence that does exist is instructive instead of trivial, where the Salvadoran text limits the obligation to the operation initiated by whoever acquires and the Central African text extends it to purchase and sale, which shows the provision was read and adapted and not reproduced mechanically, and characterizes the transplant as a deliberate operation of legal drafting.

The correspondence does not stop at the obligation of acceptance, but rather covers the sequence of provisions that accompanies it, and that sequence is preserved in its order. Table 1 presents it.

Table 1. Correspondence of provisions between the two statutes

Six consecutive provisions reappear in the same order and with the same content, where only institutional names and numbering are modified. What traveled was not the obligation of acceptance alone, it was the architecture the Salvadoran legislator built around it.

3.2. Two Divergences That Matter

The condition of severity is the first divergence and it separates two properties that literature treats as one. The Ley Bitcoin has sixteen articles and none establishes a sanction for the economic agent who refuses to accept bitcoin, where the obligation of article 7 crosses the whole statute without a consequence attached to its breach. The Loi n°22.004 establishes in its article 19 that every contravener of the dispositions of the law is liable to a penalty of imprisonment of ten to twenty years and to a fine between one hundred million and one billion CFA francs (FCFA) [20].

This point has to be formulated with precision, given that article 19 does not individualize offences by type, it does not say that whoever refuses to accept cryptocurrencies incurs that penalty but that whoever contravenes the law incurs it. The connection between article 10 and the penal clause of article 19 is, then, a question of interpretation. And that interpretation was made at the time and by an authority that cannot be suspected of exaggeration, where the governor of the Banque des États de l'Afrique Centrale identified in his official correspondence article 10 as the disposition that obligates economic agents to accept cryptocurrencies and stated that its violation was penally sanctioned by article 19 [24].

The consequence for my analysis is direct. The same obligation was promulgated in one country without any sanction and in the other with a penal clause that a supranational monetary authority read as covering imprisonment of up to twenty years. If severity determined whether a monetary mandate operates, one would expect divergent outcomes. The outcomes did not diverge.

The second divergence concerns the internal coherence of the transplanted text. The Salvadoran exemption of article 12 refers explicitly to article 7, that is to say, to the obligation it exempts. The Central African exemption of article 21 refers instead to article 11, and the published text contains besides the typographic repetition of the word article, an anomaly that academic reproductions repeat in identical terms, which indicates a characteristic of the promulgated text and not a transcription error [20, 27]. But the obligation of acceptance is not in article 11, which establishes that the State provides alternatives allowing the user to transact in cryptocurrency with automatic convertibility, a duty of the State and not of the private economic agents that article 21 claims to exempt.

I do not present this anomaly as proof of the non operation of the mandate, given that a drafting defect shows carelessness and not the absence of application. I present it as an indication difficult to explain under the alternative hypothesis. A norm actively enforced brings its own defects to the surface quickly, because the first economic agent required to comply invokes the exemption and discovers it points nowhere. The anomaly survived the promulgation of the statute, its publication in the Journal Officiel and the eleven months during which the obligation remained in force.

4. The Non Operation of the Mandate

4.1. El Salvador, The Mandate That the Government Declined to Apply

The Salvadoran case presents a characteristic unusual in the study of monetary mandates, where the government renounced applying the obligation before the statute entered into force. Immediately after the text became public, officials of the Gobierno de El Salvador declared that there would be no obligation to accept bitcoin, invoking article 12 of the law itself, which exempts those who in an evident and manifest way do not have access to the technologies that allow executing bitcoin transactions [19]. The Salvadoran press documented thirteen different moments of contradiction among officials on whether the use was obligatory or voluntary [7].

That renunciation met no legal obstacle, and here the architecture of the statute is what matters. The Ley Bitcoin establishes no sanction for the economic agent who refuses to accept bitcoin, and designates no authority charged with verifying compliance with article 7. The Banco Central de Reserva and the Superintendencia del Sistema Financiero received in article 11 the mandate of issuing the corresponding regulation, but that mandate refers to the operation of the system and not to supervising the acceptance obligation. The government did not need to repeal anything in order not to apply the norm. It was enough not to apply it.

I have not identified, in the material reviewed, any procedure sanctioning an economic agent for refusing bitcoin under article 7. The sources consulted include the records of the Asamblea Legislativa, the Diario Oficial, the publications of the Banco Central de Reserva and of the Superintendencia del Sistema Financiero, the resolutions of the Comisión Nacional de Activos Digitales and the mutual evaluation documentation of the Grupo de Acción Financiera de Latinoamérica (GAFILAT) [12]. This absence shows the lack of documented enforcement and not the proof that no individual action ever happened, although a sanctioning regime the statute never established cannot have been applied.

The measurements of effective use are consistent with the absence of application. Alvarez, Argente and Van Patten documented, on the basis of a representative household survey and transaction data from the Chivo Wallet, that 60.66 per cent of users abandoned the application after redeeming the initial incentive of thirty dollars, and that only 11.4 per cent of firms had ever completed a sale in bitcoin [5]. The survey of the Universidad Centroamericana José Simeón Cañas published in January 2024 established that 88 per cent of the persons consulted had made no transaction in bitcoin during the whole of 2023 [25]. And remittances through digital wallets, the principal promise of the policy, went down from 1.34 per cent of the total in 2023 to 1.13 per cent the following year [7].

4.2. The Central African Republic, The Mandate That Could Not Be Implemented

The Central African case has no measurements of use comparable to the Salvadoran ones, and I do not substitute that absence with indicators of digital infrastructure, for the reasons explained in the method. What it does have is documentary evidence about the conditions of implementation, more direct than any measurement of use, given that it does not depend on the behavior of the population.

In first place, the statute created a supervisory authority without defining it. Article 13 of the Loi n°22.004 creates the Agence Nationale de Régulation des Transactions Électroniques and leaves its organization and functioning to regulatory texts the statute does not enumerate [20]. The mutual evaluation report of GABAC records that the agency had not been put into operation, that no clear dispositions specified its competences of control and sanction, and that beyond the statute no other regulatory measure had been adopted to frame the sector [11]. The authority designated to supervise compliance did not exist in operative form while the obligation was in force.

In second place, and this distinguishes the Central African case from any other, the obligation entered into contradiction with the regional monetary architecture within days of promulgation. On 29 April 2022, seven days after promulgation, the governor of the Banque des États de l'Afrique Centrale addressed the Minister of Finance and Budget of the Central African Republic, requesting the repeal of the law and convoking extraordinary sessions of the regional organs for 5 and 6 May [24]. On 6 May 2022 the COBAC adopted the Décision D 2022/071, which prohibited the institutions under its supervision from holding cryptoassets on their own account or on account of third parties, from using them, from converting them into CFA francs or foreign currencies, and from denominating assets or liabilities in them [8, 15].

The consequence has to be stated explicitly. The national statute obligated every economic agent to accept cryptocurrencies, while the supranational banking authority prohibited the whole formal financial system from holding, converting and recording them. Complying with article 10 through formal financial channels became, from 6 May 2022, juridically impossible for any agent operating through a supervised institution. The mandate did not fail to operate only because the State lacked the capacity to reach its addressees, it failed also because the regional architecture removed the infrastructure through which compliance would have been channeled.

I have not identified any documented sanctioning procedure under the Loi n°22.004. The sources consulted include the statute itself, the decisions of the regional monetary and banking authorities, the country reports of the International Monetary Fund for the monetary community, and the mutual evaluation report [11, 15]. The same caution formulated for the Salvadoran case applies here.

4.3. What the Comparison Establishes

The same obligation, written in almost identical terms, was promulgated in one country without any sanction and in the other with a penal clause read as covering imprisonment of up to twenty years. In neither was it applied, and in neither did the State build the administrative apparatus its application would have required, where the Salvadoran statute designated no supervisory authority and the Central African statute designated one never put into operation.

The severity of the announced sanction, then, does not explain the outcome, because it varied from zero to the maximum while the outcome stayed constant. What did stay constant is the population on which the obligation fell, a commercial economy whose majority operates outside every registry and which the State can neither observe nor identify nor sanction. The condition that explains the non operation of these mandates does not lie in what the norm threatened. It lies in whom the norm addressed.

5. Implications

5.1. Forbearance or Incapacity

Section 1.3 left open a question the evidence now allows me to answer. The forbearance of Holland describes a government that can enforce a norm and decides not to, for electoral reasons, and the Salvadoran case appears at first sight to fit, given that the officials of the Gobierno de El Salvador announced publicly that nobody would be obligated to anything, which is exactly what a government practicing forbearance would say [13].

But forbearance presupposes that there is something to withhold. The Ley Bitcoin established no sanction for refusing bitcoin and designated no authority to verify compliance, consequently the government was not renouncing a faculty it possessed, it was describing a situation the statute had already created. A government cannot decide not to apply a sanction the law never gave it. The Central African case does not fit the description either, and for a different reason. There the statute did establish a penal clause and did create an agency, but the agency was never put into operation and the regional banking authority removed, two weeks after promulgation, the financial infrastructure through which compliance would have been channeled.

Neither case, then, is forbearance in the sense Holland gives the term. In El Salvador the mandate was unenforceable by design, because the statute omitted every element that enforcement requires. In the Central African Republic it was unenforceable by circumstance, because the elements the statute did include never came into existence. The distinction matters, given that a policy problem solved by changing the incentives of a government is quite different from one solved by building administrative capacity, and these two cases belong to the second class.

5.2. The Condition Beyond These Two Cases

The condition can be stated in general form. A monetary mandate produces effects in the conduct it claims to govern when the authority that dictates it can observe the obligated population and impose a consequence on whoever does not comply. Where that visibility is complete, the mandate can be applied and its observance verified. Where it is minimal, what the norm produces is what the sociology of institutions calls decoupling, a rule that exists in the legal order and does not exist in the behavior of the agents it supposedly governs [21].

This condition has been absent from literature on monetary policy, in my judgment because that literature tends to assume a State capable of applying its own norms, reasonable in economies with low informality and not in most of Latin America, of Africa and of Southeast Asia [14, 22]. The relevant question for a government considering a monetary mandate is not whether the technology works nor whether the design is adequate. It is whether the State can reach the people on whom the obligation is placed.

5.3. The Test of the Central Bank Digital Currencies

A reader may object that both cases share a characteristic that could explain everything without invoking enforceability, which is that both imposed an asset of very poor quality. Bitcoin is volatile, it is not issued by any monetary authority, and it cannot serve as unit of account, a characterization the Russian literature has formulated with precision in defining it as an artificial or surrogate form of money [1], so one could argue that the mandates did not operate because nobody wanted to use what they imposed.

The Nigerian experience allows testing that objection, because Nigeria did have the asset these two countries did not. The Central Bank of Nigeria launched the eNaira in October 2021, the same month the Ley Bitcoin entered into force, and the instrument was superior in every dimension that matters. It is issued by the monetary authority itself, it presents no volatility, and it was designed to be accessible through Unstructured Supplementary Service Data (USSD), which means it works on basic telephones [23].

Adoption stayed below 0.5 per cent of the population [23]. In December 2022 the Central Bank of Nigeria attempted to force it through a different instrument, where instead of obligating anyone to accept the digital currency it restricted the alternative, limiting cash withdrawals and combining the measure with the demonetization of the existing notes. The consequence was a cash shortage that produced queues, protests and riots, paralyzed a large part of the commercial activity of the country and ended with the intervention of the Supreme Court. The International Monetary Fund reported in May 2023 that 98.5 per cent of the issued wallets had never been used, and the proportion stayed the same in 2025 with around thirteen million wallets [23].

Two instruments as different as a volatile private asset and a currency issued by a central bank, imposed on populations that operate in good measure outside every registry, produced the same result. The technical quality of the instrument does not modify the condition. And this matters at a moment when more than a hundred central banks are developing retail digital currency projects, because the designers can improve the asset without touching the problem that decides whether their mandates will operate. The structure of informality should be treated as a design parameter and not as an implementation obstacle to be resolved later. The Russian literature on dollar denominated stablecoins points in the same direction, given that the instruments which do reach populations outside the formal banking system do so without any mandate obligating anyone to accept them [3].

Conclusion

The present article asked whether the obligation of acceptance that El Salvador established in June 2021 and the Central African Republic reproduced in April 2022 produced effects in the conduct it claimed to govern. It did not, in either country.

What makes this answer useful is that both countries attached to the same obligation opposite regimes of consequence. The Ley Bitcoin established no sanction for the economic agent who refused bitcoin and designated nobody to verify compliance. The Loi n°22.004 established a penal clause of ten to twenty years of imprisonment and fines of up to one billion FCFA, which the governor of the Banque des États de l'Afrique Centrale read, seven days after promulgation, as covering the refusal to accept. Severity varied from zero to the maximum. The outcome stayed the same.

What stayed constant is the population on which the obligation fell, a commercial economy whose majority operates outside every registry and which the State can neither observe nor identify nor sanction, and which in the Salvadoran case represents sixty nine per cent of employment [14]. The condition that explains the non operation of these mandates does not lie in what the norm threatened nor in the quality of the asset it imposed. It lies in whom the norm addressed, and the Nigerian experience confirms it from the opposite direction [23].

The present research leaves two lines open, whether the condition holds in other cases of monetary mandate over economies with high informality, which the present design does not allow me to establish, and the trajectory that followed these statutes, given that both were revised, the Central African one in April 2023 and the Salvadoran one in January 2025, through quite different paths. I address that question in separate work.