The Cuban government has granted its central bank the power to legalize and regulate the crypto economy, albeit with no definitive deadline.
The Cuban government has announced on Thursday, Aug. 26, 2021, that it is granting the country’s central bank the power to regulate the use of virtual currencies in commercial transactions. The resolution published in the government’s official gazette reveals that the Central Bank of Cuba will be authorized to grant licenses to crypto exchange and payment service providers.
The use of cryptocurrencies in Cuba falls in a gray legal area, as it is still largely unregulated. At the moment, there is no definitive time frame for when the central bank is expected to introduce new rules for the crypto economy.
However, the government’s resolution did issue a warning to Cuban citizens: they are expected to recognize the risks and responsibilities that come with conducting cryptocurrency operations or providing related services outside of the legal financial system.
The move comes months after another Latin American country, El Salvador, decided to adopt Bitcoin (BTC) as legal tender. The latter country’s parliament resolved on June 8, 2021, to allow the use of cryptocurrencies with no restrictions on the types of transactions or parties involved. The resolution is slated to come into effect on Sept. 7, this year.On June 7, El Salvador’s president, Nayib Bukele, announced a partnership with the digital wallet provider, Strike, to modernize the country’s economy and integrate Bitcoin into it. However, Salvadorans are well ahead of their government as the volume of BTC remittances in the country grew by a factor of four in the year before the parliament’s resolution.
To be clear, El Salvador’s plan to make Bitcoin a true national currency, on par with the U.S. dollar, is significantly different from the Cuban government’s decision, which only intends to legitimize cryptocurrencies as a legal means of payment.
Why Is Crypto Popular in Latin America?
The use of cryptocurrencies is highly popular among the less privileged citizens of the developing economies of Latin America. It is especially the case when it comes to receiving remittances from relatives working abroad in communities with no access to traditional banking (roughly 70% of El Salvador’s population).
Bitcoin and other cryptocurrencies boast universal availability, as anyone with a smartphone and access to the internet can use them. Other advantages offered by crypto include low fees and direct settlement between the two parties — removing the middlemen who are prone to take advantage of the unbanked by charging excessive commissions.
The situation is even worse in Cuba: there is no available precise data on how many of its citizens are unbanked, as the country has been under a literal economic blockade by the U.S. since the early 1960s. With almost zero access to the global financial system, Cubans struggle with such basic things as obtaining bank cards for international use or purchasing goods from abroad, according to Reuters.
As such, some citizens of the Caribbean island nation have already resorted to using cryptocurrency to circumvent the American sanctions. The founder of the Telegram channel for Cuban crypto enthusiasts, CubaCripto, has estimated that at least 10,000 people on the island use crypto for basic necessities, such as online shopping or cellphone plan renewal.
The Cuban government’s most recent resolution is likely to positively affect the well-being of thousands of Cubans, as the cryptocurrency economy will now be transitioning from a black market into a perfectly legal activity.
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