A recent report by NBC News has revealed that more than 100,000 Cubans use cryptocurrencies for different purposes. Some use it for everyday activities, like buying a coffee or beer; some use it to protect their savings against inflation, while others even for entrepreneurial and business purposes. The adoption of cryptocurrency is high in Cuba because the country is badly hit by US sanctions which have affected its economic growth and local currency and led to high inflation rates. With inflation rates as high as 100% last year, several Cubans are turning to cryptocurrencies to gain more control over their money. Some have started actively trading on crypto platforms to earn more as their day jobs don’t provide them enough. Decades of US sanctions have isolated them from the global financial system. Cubans have been fending for themselves for a long time as the communist government has not been able to meet their needs. However, with the proliferation of mobile devices and access to the internet, they have learned about the tremendous opportunities offered to them by cryptocurrencies.
Initially, only 1-2% of Cubans used cryptocurrencies for sending money or trading. However, in 2020, (former) President Donald Trump banned Americans from sending remittances to their families through Western Union. Western Union was the primary (and the only) way for many Cuban Americans to send money back home. This was when Cubans started looking for alternative ways of transferring money. Cubans began sending remittances through cryptocurrencies. Mobile apps like telegram also played a huge role. Some formed telegram groups to discuss crypto exchange rates and exchange money through informal means. More institutionalized companies like BitRemesas.com were founded that worked exclusively on processing crypto remittances. They pay local currency directly in the bank account of the receiver.
Finding Ways Around US Sanctions
Due to stringent US sanctions, Cubans cannot access different services, including eBay, Amazon, Skype, Apple Store, Zelle, PayPal, Visa, etc. Cuban entrepreneurs no longer have to restrict themselves to using selected services. With cryptocurrencies, they can pay for whatever they want. The report highlighted that Cuban businesses use cryptocurrencies to buy services like anti-virus, web hosting, and other software licenses. Other savvy entrepreneurs utilize crypto to directly pay for imported goods like phones, motherboards, etc. To get their products, they pay a crypto fee to “mules” – a local term for people who carry goods for others. Others are also selling their services online to get paid in crypto. The report demonstrated how people receive their salaries (assignment fees) from companies in the US, Europe, and Latin America. Cubans have had very limited access to the internet, and they couldn’t sell their services online like others. But the recent internet and mobile phone revolution have changed everything for them. A huge benefit of cryptocurrency is anonymity; Cubans are protected from the prying state. Thus, for Cuban residents, cryptocurrencies represent a path to financial freedom, a way to evade sanctions and save their money from high inflation.
What’s the Cuban Government Thinking?
The Cuban government is interested in legitimizing cryptocurrencies. Recently, Cuba approved cryptocurrency services, and the Cuban Central Bank is looking to issue licenses to virtual asset service providers in the country. Experts say that this move can help Cuba evade some US sanctions, which have not allowed the country to access financial markets and international payments systems. It might come as a shock to many but Cubans cannot even get credit or debit cars for international use. Cuba might follow the footsteps of El Salvador, which recognized Bitcoin as a legal tender just last year. If Cuba adopts virtual currencies, it will be able to reduce the cost of international transactions while taking advantage of an alternative payment network. The Central Bank is already thinking of creating a crypto-friendly framework to bring the benefits of virtual currencies to the country. Cuban President Miguel Díaz-Canel said that the government is assessing the advisability of using cryptocurrencies in the country.
According to the state media, the Cuban pharmaceutical sector and the national oil company are already utilizing blockchain to some extent; however, the scope and methodology of use are unclear. Cuba is progressively creating a regulatory framework for cryptocurrencies, unlike the Chinese government, which banned crypto in 2021 due to environmental and money laundering concerns.
For over half a century, the Cuban economy has crumbled under the US sanctions that prevent other nations from having trade relations with the country. The US government has continually fined various European and non-European banks billions of US dollars for conducting trade and business in Cuba. For instance, the French bank BNP Paribas had to pay around $9 billion in fines for violating US sanctions and conducting business in Cuba, Iran, and Sudan. Even though European countries are US allies, the US has not shied away from fining European entities even in the case of a minor violation. Such methods of intimidation and deterrence have pushed Cubans to look for alternative ways to process transactions without the need for banks.
The Obama administration removed Cuba from the list of states that sponsor terrorism to improve relations between the US and Cuba. However, the Trump administration relisted Cuba, which has made payments for everyday goods, including vaccines, machinery, and fertilizers, even more difficult. Experts speculate that President Biden will soon remove Cuba from the list. However, the delay is severely impacting the Cuban economy. The economy fell by 11%, with no improvement signs this year just last year. The key contributor to the Cuban economy – tourism – was down by 95% due to the pandemic, which has worsened the situation.
The use of cryptocurrencies is revolutionary, especially for countries hit badly under sanctions. Other countries like Venezuela and Iran are exploring options to make a legal framework for cryptocurrency payments. Since cryptocurrencies are not centralized entities, no government or central bank can control or block the use of cryptocurrencies for any country. Such decentralization is the key to empowerment and financial autonomy.
[Photo by Karolina Grabowska]
The views and opinions expressed in this article are those of the author.
Ian Kane is the Co-Founder at Unbanked, a global fin-tech platform built on blockchain. Kane has worked in technology & digital media for over 10 years with a heavy focus on business development, sales, and strategy. His diverse professional background enables him to bring unique insight and experience to every challenge he takes on.