Strict US sanctions restricting Cuba’s ability to conduct international trade have led more than 100,000 Cubans to turn to cryptocurrencies as an alternative path to financial freedom.
Companies chose cryptocurrency
US sanctions imposed on the communist country of Cuba prevent the use of internationally accepted credit and debit cards. Online payment channels like Paypal, Revolut and Zelle are also banned in the country. Therefore, a significant part of the population, feeling the restrictions imposed by sanctions, chose cryptocurrency as an alternative means of transaction. These Cubans, who include many small business owners, have benefited from the advent of mobile Internet that arrived in the country just three years ago. The spread of smartphones and mobile internet in this island nation was quite expansive as it opened other payment channels and financial freedom to a largely unbanked population. Local entrepreneurs believe that thanks to digital currencies, their operations are no longer dependent on payment service providers, which ends up rendering all bans inconsequential.
Dr. Emily Morris, an economist at University College London, believes that the fact that Cuban citizens are turning to cryptocurrencies is not surprising. she said,
“If you can transact directly between two parties that don’t have to go through a bank, that would be interesting.”
Cryptographic Regulations in Cuba
The previous lack of regulation in the country has resulted in an increase in cryptocurrency activity, especially during the initial months of the pandemic. Local cryptocurrency exchanges have seen an influx of customers, nearly doubling on a monthly basis. In 2021 there was talk of the Cuban government investing in cryptocurrencies. Shortly after, it was announced that the central bank of Cuba would fulfill the mission of exploring the regulation of cryptocurrencies. The bank would also establish an action plan to register and license crypto service providers in the country. It was also revealed that cryptocurrency payment authorizations would only be granted in matters of “socio-economic interest” in order to monitor all cryptocurrency operations and prevent illegal and fraudulent activities.
Earlier this month, the Cuban central bank announced its intentions to implement a regulatory framework for digital assets, starting with a compulsory license for virtual asset service providers. The country’s central bank has already issued a Central Bank Digital Currency (CBDC). Cuban President Miguel Diaz-Canel has also expressed his favorable views on the sector and is reportedly studying the legalization of cryptocurrency payments. This has led to speculation that Cuba could be following in the footsteps of El Salvador, the Latin American country that adopted Bitcoin as legal tender.