Cuba Central Bank Moving Nearer To Regulations For Cryptocurrencies- Another Signal To United States That Cuba Is Changing. Private Sectors Are Expanding- Though Government Remains Reluctant
/LINK To Gaceta Oficial Resolution 215 (26 August 2021)
From Bitcoin Magazine (8/27/21) excerpts
On Thursday Cuba’s government said it would “recognize and regulate” Bitcoin and other cryptocurrencies for payments on the island, Bloomberg reported. The local Cuban Official Gazette has published a resolution which stated that the central bank will create rules for Bitcoin and other crypto assets to determine licensing laws for providers of crypto services on the island.
The resolution stated the central bank has power to authorize the use of Bitcoin and other crypto for “reasons of socio-economic interest,” according to the report. The resolution also said the state will act as a check over the bank’s operations, preventing the use of Bitcoin for “illegal activities”.
Because of tough embargo rules in Cuba it has become difficult to use dollars, and as a result the popularity of Bitcoin has grown among Cuba’s technologically savvy. A local programmer told Bloomberg that some Cubans are already using crypto in tandem with gift cards to make online purchases. The announcement comes just 10 days before El Salvador is to become the first country to make Bitcoin legal currency as a way to remove the fees and dangers of sending cash remittances, a staple of both economies.
It remains unknown how the central bank of Cuba will choose to regulate Bitcoin, as the only real controls it can put on the permissionless, immutable, unstoppable currency are through regulating exchanges and making it more difficult, though not impossible, for citizens to get access to its common on ramps and off ramps. Bitcoin regulation may come as a result of the government’s realization that people are using the currency to evade U.S. restrictions on sending money to Cuba.
From CUBA STANDARD (8/27/21) excerpts
Resolution 215, published Aug. 26 in the Gaceta Oficial, sets the norms how the central bank will regulate cyber currencies, and states that the central bank will license commercial providers, but spells out few details. “It will be important for the government to regulate and maintain sovereignty over the financial system”, said Eduardo Sánchez, a Cuban blockchain expert. “The Cuban context shares the same risk with any other crypto markets in the world — the volatility, security, capital flight, financing for criminal activities.”
The official recognition of cyber currencies follows a boomlet in Cuba prompted by the U.S. government’s shutdown of most legal channels for U.S.-Cuba remittances in late 2019. A more aggressive U.S. sanctions regime against Cuba in recent years has led international banks and companies to avoid transactions involving the island, and prompted remittance giant Western Union to pull out of Cuba. And most recently, travel restrictions imposed in response to the COVID-19 pandemic have been affecting informal remittance channels. In September 2019, the Central Bank – together with the University of Havana – began to study whether the country should introduce its own cryptocurrency, following the lead of Venezuela. There has been no announcement whether the partners have come to any conclusion.
The central bank resolution is a far cry from an enthusiastic embrace. Showing official Cuba’s skepticism regarding the soundness of cyber currencies, the resolution says the central bank will warn consumers about the risks of virtual money. In a final disclaimer, the text clarifies that “natural persons assume the risks and responsibilities … of operating with virtual assets and virtual asset service providers that function at the margins of the banking and financial system, even if virtual-asset transactions between said persons are not prohibited”.
State banks and enterprises will only be allowed to use cyber currencies with the express permission of the central bank. The new rule clarifies that all cyber currency service providers will have to seek a license from the central bank. The resolution defines as cyber currency service providers “any natural or judicial person that as business or business activity dedicates itself to the exchange between virtual assets and legal currencies; the exchange between one or more forms of virtual assets; the transfer of virtual assets; the custody or administration of virtual assets or instruments that allow control over virtual assets; and the participation in the provision of financial services related to the offer of an emission or sale of a virtual asset”.
In Cuba, a tech-savvy younger generation has increasingly adopted cyber currencies, thanks to the spread of mobile Internet use, and due to a weak local currency that makes it harder to get dollars, and U.S. sanctions complicating money transfers. Crypto currencies offer a parallel financial infrastructure, allowing users to bypass the U.S.-controlled SWIFT messaging service that banks use to communicate payment instructions.
A fairly high percentage of Cubans seem to have become familiar with — or even use — crypto currency. Cubans have used virtual currencies to get paid for jobs, receive remittances from the United States, and to invest in crypto assets. Along the way, Cuba has joined the world’s most active markets with crypto currency. According to Fintech Times, Cuba in late 2020 was the No. 1 country for crypto inquiries as a percentage of all inquiries on TradingView, a platform that keeps tabs on stocks, bonds, regular currencies and cryptocurrencies.
Qbita, a bitcoin exchange platform launched in 2019, leads the field of virtual currency service providers in Cuba, with 13,000 users and a volume of US$354,771 in transactions in 2020. Qbita facilitates the exchange between bitcoin and Cuban pesos, US dollars, and other cryptocurrencies. Other startups, such as Fusyona and Bitremesas, and more recently QvaPay, are not only transmitting remittances, but provide business solutions to Cuban entrepreneurs through the use of crypto assets.
Investment platforms such as Trust Investing and QubitTech manage crypto assets and offer investment plans to Cubans. Tulip Research, a financial forensics firm focusing on blockchain, defined both as Ponzi schemes, and the national exchange commissions of Spain and Panama issued a warning in 2020 against Trust Investing. But that has so far not stopped their rising popularity in Cuba. Meanwhile, crypto mining — the “production” of virtual money — is difficult to do in Cuba. Unlike in oil-rich countries such as Iran or Venezuela, where government subsidies lower the cost of electricity needed for computers to process cryptocurrencies, Cuban “miners” face material limitations.
Says Eduardo Sánchez: “There could be an entrepreneurship boom connected to crypto assets in the next couple of years in Cuba. There is potential and talent for that. But it all depends on the relationship with the U.S. and the success of domestic reforms.”
Recently, the U.S. Treasury has been catching up, in what seems to be a systematic crackdown against U.S. companies engaging in cryptocurrency transactions involving sanctioned countries. In late December, the Office of Foreign Assets Control (OFAC) fined BitGo, a Palo Alto, Cal.-based crypto wallet and custodian, for allowing users from Ukraine, Cuba, Iran, Sudan and Syria to access its crypto wallet. Six weeks later, OFAC announced it fined BitPay Inc., after it alleged that consumers in sanctioned countries had used the Atlanta-based company’s cybercurrency merchant payment solution. Both companies settled the allegations by paying a fine and agreeing to block customers in sanctioned countries. OFAC has also added individuals and hosts of cryptocurrency addresses, such as Zcash and Dash, to the Specially Designated Nationals (SDN) list, over crimes ranging from wire fraud to election interference.
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Cuba Central Bank Moving Nearer To Regulations For Cryptocurrencies- Another Signal To United States That Cuba Is Changing. Private Sectors Are Expanding- Though Government Remains Reluctant August 27, 2021
