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This policy shift is a direct response to the growing demand for digital currencies in the region.
The government of Cuba has announced it will now recognize cryptocurrencies as a legal tender. The announcement was published in the Official Gazette on Thursday, August 26, 2021.
According to the publication, the Central Bank would be charged with regulating the use of digital currencies within Cuba. This decision had been in the pipeline for a while. Recall that in May, the president met with other government officials to discuss the possible adoption of digital assets. This followed after the communist party in April adopted cryptocurrency as part of its agenda.
Why Cuba Is Looking Towards Cryptocurrencies
Following the sanction of Cuba by President Donald Trump‘s administration for allegedly sponsoring terrorism, using dollars for transactions became difficult. This affected the country’s economy. A senior Cuban official, Johana Tabalada, estimates that as much as $20 billion was lost to the sanction. According to him, “The damage to the bilateral relationship during this time has been considerable, and the economic harm to Cuba immense.”
It is no surprise then that Bitcoin and the likes have provided a viable alternative for the tech-savvy population. Cryptocurrencies are suitable for long-distance transactions. People looking to avoid government scrutiny and regulatory eyes can easily use them. Also, they are decentralized and can be easily moved under the radar. According to local cryptocurrency expert, Erich Garcia, several Cubans already utilize cryptocurrencies when shopping online.
This policy shift is a direct response to the growing demand for digital currencies in the region. However, the Cuban government is also wary of the potentially illegal activities that it can be used for. Per the published resolution, the Central Bank will retain control. According to the bank, the digital asset will only be allowed for “reasons of socio-economic interest.”
Is Cuba the First in Line?
It is worthy of note that a similar announcement was made by El Salvador earlier in June. The central American nation upgraded Bitcoin to a legal tender to ensure citizens abroad pay their remittances.
The President of El Salvador, Nayib Bukele, stated in a tweet thread on August 24 that implementation of the Bitcoin law would commence by September 7. However, the president stressed that adoption was optional for the nation’s citizens.
Several nations are also considering digital assets. Many are in advanced stages of discussion, research, and implementation. Most of these nations are, however, opting for the more stable CBDCs. This is done in order to avoid the volatility associated with cryptocurrencies generally.