Cuba clears the way for the use of cryptocurrencies on the island. A recently published resolution by the Cuban Central Bank provides for licenses for providers of cryptocurrencies and other virtual assets for financial, currency exchange and payment activities on the island. Legal entities may only use cryptocurrencies with the express permission of the central bank. Natural persons are allowed to use virtual assets outside of the domestic financial system.
This is based on Decision 215 published in the Cuban Official Journal at the end of August (PDF). It states that the central bank can authorize the use of cryptocurrencies in business transactions “for reasons of socio-economic interest”. However, the state ensures that the transactions are controlled: “Financial institutions and other legal persons may only use virtual assets with one another and with natural persons to carry out monetary and foreign exchange transactions as well as barter and swap transactions, and to meet payment obligations, if this is done by the Cuban Central Bank has been approved.
Bypassing the US embargo using cryptocurrencies
Cryptocurrencies are enjoying increasing popularity in Cuba. The decades-long US blockade and ever new measures by Washington against Cuba’s financial sector cut the Cuban population off from international payments. Most recently, the US sanctions have led to the closure of the Western Union branches on the island.
More and more Cubans are therefore using digital currencies to shop on the Internet or to maintain the all-important money transfers from abroad. Cuban startups, for example, organize money transfers in the form of cryptocurrencies such as Bitcoin, Ether or Doge in order to circumvent Washington’s financial sanctions. Unofficial estimates, around 10,000 Cubans use cryptocurrencies.
El Salvador as a pioneer
A few steps further than Cuba is El Salvador. The Central American country was the first country in the world to make Bitcoin its official currency. At the beginning of June, the parliament controlled by President Nayib Bukele passed a corresponding law in a fast-track process. After much criticism, the president backed off a bit and declared that the use of Bitcoin will not be mandatory. Even so, serious economists do not consider the legalization of Bitcoin in El Salvador to be a good idea – because of the extreme volatility of the cryptocurrency; there are also environmental concerns and reservations about lack of transparency and possible money laundering.
Meanwhile, at the end of August, the first ATM for cryptocurrencies was inaugurated in Tegucigalpa, the capital of neighboring Honduras. This enables the purchase of the most commonly used cryptocurrencies, Bitcoin and Ethereum, with Lempiras, the local currency. In Panama, Congress is debating a bill that would regulate the use of Bitcoin and other cryptocurrencies in the country and recognize them as legal tender.