In the letter
- Western Union ends money transfers from the US to Cuba.
- It was said to be due to US sanctions.
- With traditional remittance locations cut off, Cubans could turn to Bitcoin.
After this weekend, the Americans will no longer be able to send money to Cuba via Western Union.
The money transfer service, which dominates the remittance industry with a market cap of nearly $ 9 billion, says it has been using services due to U.S. sanctions against Cuba’s communist government.
Western Union doesn’t have to serve Cuba to remain successful. After all, MoneyGram did well without the Cuban market. But Cubans still need a way to get money from abroad. So excuse the stereotype, but Bitcoin could potentially fix this.
According to a 2020 study by Florida International University, an estimated $ 2 to 4 billion per year are sent from the U.S. to Cuba through a mix of formal and informal channels. With nearly half of Cuban-American families sending money to relatives in Cuba, there is strong evidence that these cash injections play an important role in the Cuban economy.
However, since President Trump took office in 2017, US-Cuba remittances have been threatened.
To increase pressure on the Cuban communist government, the Trump administration reversed several steps taken in the Obama era to normalize relations with Cuba. In September 2019, the US Treasury Department forbidden Remittances to Cuban government officials so that US dollars cannot be used to “enrich insiders of the Cuban regime and their families.” It also limited the size and frequency of referrals to family members.
After the government released new restrictions last month, Western Union decided to pull the plug.
“For more than 20 years, Western Union has been moving money to Cuba family and loved ones on behalf of our customers to pay for groceries, rent and other expenses including micro-businesses,” a statement said. “We sincerely regret this situation and its impact on our customers.”
While there was no clear indication of how large the Cuban market is for Western Union, it’s likely the company won’t need the regulatory overhead associated with operating the Communist-run island – just as companies do because of the Avoided doing business in Venezuela sanctions against certain individuals and organizations associated with the government of Nicolás Maduro.
Alejandro Machado, co-founder of the Open Money Initiative, said Decrypt“When a company’s bloodline isn’t serving Venezuelans, lawyers often advise staying away from Venezuela to avoid problems – and companies like Western Union don’t necessarily have the risk appetite to serve a country like Cuba.”
Machado pointed to Paxful, who left Venezuela in September: “Business is booming in many countries [and] I don’t need Venezuela to feed me so they likely took their lawyer’s advice and pulled out. “
Boaz Sobrado, a data analyst and founder of the tourism website WhyNotCuba.com, explained Decrypt the scenario for Cuba, which faces some of the same economic problems as Venezuela.
“Basically, this is what happens. Cuba is experiencing the double mess of sanctions and high inflation, ”he said. “The two main routes for hard currency to enter the country, tourism and remittances, are closed due to sanctions and COVID.”
This offers an opening for Bitcoin. Sobrado announced that interest in peer-to-peer Bitcoin exchanges has increased: “The order size for bids and sales has grown massively in the Telegram channels.” While the sale of 1 BTC per day would have been a stretch just last year he said, “Now people easily sell 12.”
Sobrado said services like Cookies, a crypto exchange for transfers that Cuban recipients don’t need a bank account for, has emerged to allow Cubans to bypass sanctions, as has informal remittance deals where people can exchange BTC and foreign fiat for Cuban currency.
Without competition from the usual money transfer suspects – PayPal, Stripe and Square don’t send to Cuba – such crypto operations have less competition. But right now it has to be local. The same reasons that drove Western Union out of Cuba prevent international companies like Paxful from settling there.
In the meantime, there is still time to send via Western Union. The last day money is sent to Cuba is November 22nd. It has to be picked up by November 23rd.