Cuba, Crypto & Cash – The Ledger
Cubans buy a total of one to two bitcoins every week, according to Fusyona, the primary bitcoin exchange serving Cubans. We don’t often hear from Cuba in relation to crypto, but that changed when its government recently said it was investigating the potential use of cryptocurrency as part of its tactic to boost the Cuban economy, amidst a crisis worsened by US sanctions.
It’s not the first, and it won’t be the last country to show such a pronounced interest in cryptocurrency. So what’s behind this shift, but also, what’s needed to further drive these processes and really bring the adoption of crypto to the next level?
At present, it’s not clear whether Cuba is considering issuing its own cryptocurrency, or whether it’s leaning towards an established crypto asset such as Bitcoin. What is clear, however, is that since Facebook’s proposal of Libra, we’ve seen more countries indicate an interest in adopting crypto to tackle economic imbalances.
China, for example, although it was allegedly already working on its own digital currency for some time, sped up its efforts following Facebook’s proposal and recently announced it has completed its development and is ready to deploy its central bank-backed domestic cryptocurrency.
Equally remarkable was Bank of England’s governor Mark Carney recently changing his tone and speaking in favor of cryptocurrency as potentially being able to displace the US dollar as the global reserve currency.
But perhaps Cuba’s direction is best understood in comparison to Venezuela, which was the first country to issue its own domestic state-run cryptocurrency ‘Petro’ designed to circumvent sanctions — although it must be noted, Petro has only seen limited success. Cuba shares many of the same factors with Venezuela that are driving the adoption of crypto: an unstable local currency, strict capital controls, and widespread mistrust of state-controlled banks.
The main hurdle at the moment, however, seems to be the difficulty in converting crypto to ‘actual money’, or the other way around. Credit cards are hardly used on the island and transferring funds to exchanges through banks would potentially expose users to increased government scrutiny.
Communities faced with the difficulties brought on by vulnerable currencies, can leverage crypto as a way to hedge against economic turmoil and spread risk. For that to work, cash in, cash out networks are vital — especially in emerging economies where people are open to digital solutions but still heavily rely on cash.
Cuba fits this profile. First of all, Cuba operates two currencies: the original Cuban peso, and the Cuban Convertible Currency, which is equal to the US dollar. The latter was created to separate Cuba’s tourist economy from the wider socialist economy. As such, Cuba also has two economies: a socialist one, with low salaries and held together through subsidies; and a capitalist one.
The prominence of cash in Cuba is due to a number of reasons: the US embargo, minimal trust in banks, and an outdated economic infrastructure. The result? Most Cubans resort to storing their savings under the mattress. Only a handful of people are able to store savings overseas.
To make things more interesting, mobile technology has gained serious traction on the island nation. More than half of the population has a cell phone and there is a well-developed culture around remittances. The Internet, however, is not as accessible as it should be, with some users having to resort to the use of ‘black market passwords’, accessing the Web through hotels, or other creative means.
For any digital financial product to take off in Cuba, cash needs to be included in the model.
For example, we’ve created an ecosystem capable of catering to cash-based economies and their transition to digital, specifically blockchain-based currencies. Built on BitShares, we leverage stablecoins that are pegged to local currencies to facilitate cash-to-crypto transfers by way of cash.
In Hong Kong, at any of our affiliated Cash Points, users are able to exchange their Hong Kong dollars for Sparkdex.HKD — a stablecoin for Hong Kong dollar. They can then easily convert that to Bitcoin, Ethereum, BitShares, or to other stablecoins such as BitUSD, BitEUR, or stable.PHP — a stablecoin pegged to the Philippine Peso.
We’ve set out to create stablecoins for the world’s 180+ local currencies, and as such provide a scalable model that would work well for economies such as those of Cuba or Venezuela, enabling users to move into crypto by way of cash and, from there, spread their funds out across other stablecoins and cryptocurrencies.
Along with the further increase of Internet access and mobile usage, we believe that cash on and off-ramps are crucial to the further adoption of crypto, and provide a powerful means to lift populations out of their stagnant currencies.
Next to the existing socialist economy tethered to the Cuban peso, and capitalist market led by the Cuban Convertible Currency, perhaps soon we’ll see a flourishing Cuban crypto market built on Bitcoin and stablecoins.