The government of Cuba in Havana has announced that it will recognize and regulate cryptocurrencies for payments.
The Central Bank of Cuba will set rules for such currencies and determine how to license crypto service providers, according to a resolution published in the Official Gazette. The resolution states that the Central Bank can authorize the use of cryptocurrencies “for reasons of socio-economic interest.” It also explicitly declared that operations could not involve illegal activities.
Some Cubans are already using them for online purchases, according to a local cryptocurrency expert.
Circumventing dollar sanctions
The popularity of cryptocurrencies has grown among the technologically savvy in Cuba, as using the American dollar has become increasingly difficult. This has particularly been the case since the imposition of toughened embargo rules imposed under the former U.S. President.
Although cryptocurrencies enable Cubans to circumvent the need for the dollar, this is what the U.S. wants to avoid. Using cryptocurrencies could undermine the restriction on sending money to Cuba as part of the conditions imposed by the embargo. However, many people in developing economies depend on such remittances.
Crypto remittance test
By recently adopting bitcoin as legal tender, El Salvador is setting an example that could be followed by other countries in the region, who are anxiously waiting to see whether it could lower the cost of remittances. Notably, a recent report from Bank of America anticipates that this will be just the case.
“If the cost of remittances drops substantially… other countries will probably seek that advantage and adopt it,” said Dante Mossi, the executive president of the Central American Bank for Economic Integration (CABEI).
According to the regional developmental bank, remittances are an important source of income for millions of people. Many in the region lacking access to bank accounts or credit cards rely on money sent home from relatives abroad. Mossi called the plan an “out of this world experiment” to increase financial inclusion.