Cuba has passed a resolution to authorize and regulate the use of cryptocurrencies amidst mounting pressure of US sanctions. Cryptocurrencies would make international remittances seamless which have become quite difficult to execute due to the sanctions.
After El Salvador, Cuba became the second country to formally authorize and regulate cryptocurrencies.
Earlier Paraguay too was contemplating passing a law recognizing cryptocurrencies. Latin America is becoming the hotbed for the Digital Assets industry as it seeks a new avenue to escape years of economic turmoil.
On August 26, Cuba passed Resolution 215 published in the Official Gazette on August 26. It seeks to establish a framework for digital assets.
The text of the Resolution 215
A translation of the document reads
“The Central Bank of Cuba, for reasons of socio-economic interest, may authorize the use of certain Virtual Assets in commercial transactions, and grant license to Virtual Asset Service Providers for operations related to the financial, exchange and collection or payment activity, in and from the national territory.”Resolution 215, Official Gazette of Cuba
The Central Bank of Cuba will regulate the use of certain virtual assets in commercial transactions as well as be responsible for granting licenses to service providers.
The text defines ‘Virtual Assets’ as “digital representations of value that can be traded or digitally transferred and used for payments or investments. This term includes various meanings used for the same purposes, such as Digital Asset, Crypto Asset, Cryptocurrency, Virtual Currency, and digital currency.”
The possible reason for the acceptance
The Biden administration has taken a hawkish stance in its Cuba policy. It has tightened the Trump-Era sanctions even further, making it difficult for the island nation to receive US Dollars it needs for international trade.
In 2020, Western Union, which had been operating in Cuba for more than 20 years, shuttered all of its 400-plus centers, due to increasingly aggressive Trump-Era sanctions.
Long-distance transactions can happen quickly through cryptocurrencies. Moreover, they provide pseudonymity which can circumvent the US Sanctions.
COVID pandemic too is to blame for Cuba’s forex troubles as earlier Cubans abroad used to remit money through ‘Mulas’.
As per a report from The Economist, Mulas are Cuban residents who travel to the United States, Panama, and other places (even Russia) and bring back goods that are otherwise scarce or, when available in state-owned shops, overpriced. They range from kitchen appliances to cosmetics. Mulas also bring nearly half of cash remittances, perhaps $1.8bn a year.
Cryptocurrencies are international currencies. They don’t have a State or Central Bank governing their supply or determining their recognition. Their decentralized nature enables transnational flow without any interference.