Cuba will now recognize and regulate cryptocurrencies like Bitcoin, citing “reasons of socio-economic interest”.
Resolution 215, published in the State Gazette on Thursday, said the central bank will set new rules for dealing with digital currencies. Commercial providers of related services now require a central bank license to continue their operations.
The American embargo against the communist state has made Cuba a pariah in the world economy. Cuba’s decision to join El Salvador in adopting decentralized virtual cash could help the country circumvent the U.S. sanctions regime established under former President Trump and extended under current President Biden.
“It’s historical for them to take it,” said Boaz Sobrado, a London-based fintech data analyst who worked in the crypto space in Cuba for four years.
“This is a conservative government that is still set in the traditional Marxist way. In fact, the Cuban Communist Central Bank was founded by Che Guevara. The fact that it regulates carefully shows that they are interested in what it can bring them” continued Boaz.
Sending and receiving money between the US 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 researching Cuba for ten years.
In 2020, Western Union – a particularly important remittance channel that has operated in Cuba for more than 20 years – closed all of its 400+ locations amid increasingly aggressive Trump-era sanctions.
The process of entry and exit of funds has been made even more complicated by the Covid-19 pandemic.
Prior to the Covid outbreak, Tankha said some Cubans would turn to underground and semi-formalized courier services called Mulas, where agencies would bring cash to Cuba and distribute it to people on the island. But when the pandemic paralyzed flights around the world, even this path to cash became much more difficult.
It was this urgent need for cash – against the backdrop of a global pandemic and blocked access to the global economy – that helped boost crypto adoption in Cuba, experts say.
“There’s kind of a niche sector of people who have turned to cryptocurrency,” Tankha said.
She credits the burgeoning crypto community with 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 to add to Bitcoin’s appeal.
The use case for crypto in Cuba goes beyond cross-border money transfer. It’s also about Cubans who want to develop their income potential.
“If you’re a software developer or an NFT artist, you could actually get paid for your work in cryptocurrency, and I think that’s where the potential actually lies,” said Tankha. “It opens up a whole new economy for Cubans to participate in.”
That is exactly what photographer Gabriel Guerra Bianchini does. 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 was sold for 1.6 Ethereum in six days,” said Bianchini. “This is bigger than just making money. This is really freedom.”
However, receiving funds, including through crypto channels, requires some creativity, as many of the exchanges require know-your-customer compliance.
“The moment Cubans join this ecosystem, they are exposed to many risks, even if they are using a VPN that allows them to hide their location,” Tankha said.
Tankha tells CNBC that many exchanges, including those not based in the US, continue to geoblock Cubans.
Experts tell CNBC that the mass adoption of crypto in Cuba is still a long way to go.
The resolution itself – while a promising sign for Cubans interested in participating in the global economy via bitcoin rails – is hardly a warm hug of all things crypto-related. The text contains a healthy dose of skepticism, such as a disclaimer warning citizens about the risks of virtual assets and ancillary service providers who, according to the government, operate on the “edge of the banking and financial system”.
But Sobrado is optimistic that any kind of regulatory attention to crypto is a good thing.
“Regulators around the world, from the Communist Central Bank of Cuba to the SEC, are trying to get a grip on the cryptocurrency industry. This implies that crypto is a global phenomenon and regulators have decided that it will stay here and be worth looking into, ”Sobrado said.
“Oddly enough, it brings some sort of legitimacy to the room. It’s gotten too big to ignore,” he said.