Resolution 215 of 2021 issued by the Banco Central de Cuba (BCC) recognizing cryptocurrencies is now in effect. It means cryptocurrencies can now be used to make payments in Cuba.
Cuba’s official state news agency, Prensa Latina (PL), reported that the decree was enacted on September 15.
Resolution and its Enactment by Cuba
Cryptocurrencies can now be used for commercial transactions and investments in Cuba as Resolution 215 is now in force.
It defines cryptocurrencies as a “virtual asset the digital value representation that can be traded or transferred digitally and used for payments or investments”, according to PL.
It also provides for the licensing of Virtual Asset Service Providers for financial operations in/from Cuba.
Possible Reasons for Acceptance of Crypto
Coin Crunch India had reported previously how the Biden administration’s hawkish stance is causing troubles for the island country. Cuba is facing immense difficulties in receiving remittances from abroad due to tightened US sanctions.
In 2020, Western Union shuttered all of its 400-plus centers after 20 years of operation in Cuba, due to increasingly aggressive Trump-Era sanctions.
COVID pandemic exacerbated Cuba’s mounting forex troubles.
Earlier, Cubans abroad used to remit money through ‘Mulas’ which is no longer viable due to travel restrictions. Mulas are Cuban residents who travel abroad and bring back scarce goods, or overpriced goods that are available in state-owned shops. They account for nearly half of cash remittances, perhaps $1.8bn a year.
So, Cuba had to accept cryptocurrencies because they provide pseudonymity that can circumvent the US Sanctions. Moreover, they make long-distance transactions quick and affordable.
Potential Risks Associated with Crypto Assets
The BCC has also cautioned that cryptocurrencies operate outside the formal banking system and can pose a risk to the monetary and financial stability of the country.
Volatility and decentralization have been cited as the reasons for all the aforementioned risks. Both these contribute to the free flow and unregulated movement of digital assets around the globe without any “emission control, regulation, official supervision, sanctioning regime, or support from monetary authorities.”
Another caveat issued is the use of digital assets by bad actors to fund illicit activities.
A global currency for the world has been a distant dream for a long time. European Union’s Euro has been a major success in this regard, but it caters to only one region. Digital currencies might be the option the world is are looking for as they are uniform and can be traded easily anywhere.