Cuba will now recognize and regulate cryptocurrencies like bitcoin, citing “reasons of socioeconomic interest.” Experts say it’s a historic move for the island nation.
Resolution 215, which was published Thursday in the state-run Official Gazette, says the central bank will set new rules for how to deal with digital currencies. Commercial providers of related services will now need a license from the central bank to continue operations.
The American embargo on the communist state has turned Cuba into a pariah in the global economy. Cuba’s decision to join El Salvador in embracing decentralized virtual cash could help the country to circumvent the U.S. sanctions regime, which was dialed up under former President Trump and has been extended under now President Biden.
“It’s historic that they are embracing it,” said Boaz Sobrado, a London-based fintech data analyst, who spent four years working in crypto in Cuba.
“This is a conservative government still set in traditional Marxist ways. In fact, the communist Cuban central bank was founded by Che Guevara. The fact that they are cautiously regulating shows they are interested in what it can bring them,” continued Boaz.
Sending and receiving money between the U.S. and Cuba became extremely difficult under the Trump administration, according to Dr. Mrinalini Tankha, a professor of anthropology at Portland State University, who has been doing research on Cuba for ten years.
In 2020, Western Union – a particularly significant channel for remittances, which had been operating in Cuba for more than 20 years – shuttered all of its 400-plus locations, amid increasingly aggressive Trump-era sanctions.
The process of getting money into and out of the country was made even more complicated by the Covid-19 pandemic.
Before the Covid outbreak, Tankha said that some Cubans would turn to underground and somewhat semi-formalized courier services called mulas, where agencies would carry cash to Cuba and distribute it to people on the island. But as the pandemic grounded flights around the world, she says that even this path to cash became much more difficult.
It was this desperate need of cash – against a backdrop of a global pandemic and blocked access to the world economy – which helped foment a rise in crypto adoption in Cuba, say experts.
“There is a kind of niche sector of people who have turned to cryptocurrency,” said Tankha.
She credits the burgeoning crypto community to the rise of the internet in Cuba, as well as the fact that there are so many more people who have smartphones and 3G connectivity. A weak local currency is also a factor likely contributing to the appeal of bitcoin.
The use case for crypto in Cuba transcends the cross-border transfer of money. It’s also about Cubans looking to open up their income-generating potential.
“If you’re a software developer, or if you’re an NFT artist, you could actually get paid through cryptocurrency for your labor, and I think that’s where the potential actually is,” said Tankha. “It opens up a whole new economy for Cubans to participate in.”
Photographer Gabriel Guerra Bianchini is doing just that. Havana-based Bianchini was one of the first artists in Cuba to break into the world of non-fungible tokens, or NFTs.
“My first work sold in six days for 1.6 ethereum” said Bianchini. “This is bigger than just making money. This is really freedom.”
However, receiving funds, even via crypto channels, requires some creativity, because many of the exchanges require know-your-customer compliance.
“The minute that Cubans participate in this ecosystem, they face a lot of risks, even if they’re operating with a VPN where they’re able to hide their location,” said Tankha.
Tankha tells CNBC that many exchanges, including those not based in the U.S., continue to geo-block Cubans.
Experts tell CNBC that it is still a long road ahead for mass adoption of crypto in Cuba.
The resolution itself – while a promising sign for Cubans keen to participate in the world economy via bitcoin rails – is hardly a warm embrace of all things crypto. The text includes a healthy dose of skepticism, such as a disclaimer warning citizens about the risks of virtual assets and the ancillary service providers, which the government says operate at the “margins of the banking and financial system.”
But Sobrado is optimistic that any sort of regulatory attention with respect to crypto is a good thing.
“Regulators around the world, from communist Cuba’s central bank, to the SEC, are trying to come to grips with the cryptocurrency industry. This implies that crypto is a global phenomenon and regulators have decided that it’s here to stay and worth engaging with,” said Sobrado.
“Strangely enough it’s bringing some sort of legitimacy to the space. It’s gotten too big to ignore,” he said.