Cuba Decides to Recognize Bitcoin and Other Digital Currencies

The government of Cuba revealed on Thursday its plan to recognize cryptocurrencies. Once the new resolution comes in force, Bitcoin and other digital currencies will become 100% legal and regulated.

Published in the Official Gazette, the resolution puts Cuba’s Central Bank in charge of the crypto regulation. Its job will be to come up with the rules and regulations regarding the use of cryptocurrencies, which includes determining who gets to hold the license for providing crypto services on the Caribbean island.

Cuba isn’t the first country in the region to decide on such a move. El Salvador was the forerunner, whose new cryptocurrency law is scheduled to come into force on September 7.  

Cuban BTC Resolution in a Nutshell

In May, President Miguel Díaz-Canel said Cuba was seriously looking into the crypto market, seeing it as a potential source of income both for the Government and citizens.

Three months later, the Official Gazette published Resolution 215, which is meant to recognize cryptocurrencies as a legal payment method in the country. The date when the new law is supposed to come into force is September 15, 2021.

Once that happens, Cubans will be able to legally trade cryptocurrencies, albeit only using licensed service providers. Cuba’s Central Bank will decide who gets the license.

Reasons Behind Cuba’s Love for Bitcoin

Cuba’s GDP suffered heavy losses in 2020, dropping by as much as 11% compared to 2019. The main reasons behind this are the COVID-19 pandemic and the US embargo imposed on the communist nation during Donald Trump’s presidency.

Many Cubans are reliant on the money coming from abroad. However, receiving money from abroad has become very difficult since 2020. One reason is that Western Union, the world’s second-largest money transfer provider, decided to close down its 400+ locations in Cuba.

Getting the money in Cuba became even more difficult with the travel restrictions imposed to battle the COVID-19 pandemic. As a result, many Cubans switched their focus to the internet. Their solution was Bitcoin and other cryptocurrencies.

There are Still Plenty of Obstacles on Cuba’s Road to Bitcoin

The new regulation is expected to encourage Cubans to get involved with digital currencies even more. However, there’s a dose of skepticism among cryptocurrency experts. According to CNBC, the Cuban Bitcoin resolution includes all sorts of disclaimers, including the one warning Cubans about the risks that come along with the use of cryptocurrencies, saying that the industry operates on the “margins of the financial system.”

Another problem for Cuban crypto users is that the new resolution probably isn’t going to change much outside the country. Major US-based exchanges and other crypto service providers are likely to continue to geo-block the users from Cuba.

What this means is that Cubans will either have to use local (licensed) services or try to swindle their way into using foreign ones. So far, many of them have been doing it through the use of the VPN (virtual private network). However, that’s getting increasingly more difficult to do since major service providers are getting stricter with their KYC (know your customer) policies.