About the author
Boaz Sobrado is a data analyst and founder of WhyNotCuba.com, a Cuban tourism website. The opinions expressed here are his own and do not necessarily reflect those of Decrypt.
Cuba is having one of the worst years in recent history – but as a result, a perfect storm is brewing on the island nation with the introduction of Bitcoin.
Cubans live under high financial censorship and rampant inflation. Meanwhile, their access to foreign currencies has been severely restricted this year due to COVID and US sanctions. This has increased the attractiveness of cryptocurrencies, many of which act as censorship-resistant stores of value.
The usefulness of censorship-resistant technologies may not be clear to people in advanced economies, but it is perfectly clear to Cubans. Cuba is a country where people live under oppressive financial censorship. This is partly due to the communist government, which has strict rules about how private businesses function and how people handle their money.
But it is also due to the censorship imposed by the American embargo, which makes it almost impossible for ordinary Cubans to conduct international transactions. Just recently, the Trump administration announced measures that enforced Western Union will cease operations in Cuba this monthThis makes it almost impossible for millions of Cuban Americans to send money transfers home.
This measure occurs at the worst possible time.
The Cuban economy is expected to shrink by 8% in 2020 due to an already weak performance in 2019. COVID-19 has affected two major industries: tourism and remittances. Havana Airport was closed from March to November. The transfer is made from the USA about 50% fell to Cuba from $ 6 billion in 2019 to $ 3 billion in 2020.
Next the government Attempts at reform lead to the early stages of hyperinflation. Food prices have risen multiple times this year, and the Cuban peso has lost half of its value against the US dollar in informal markets in the past 12 months.
In the 1990s, when inflation was rampant in Cuba, Cubans who wanted to preserve the value of their savings turned to foreign hard currencies such as the US dollar. However, COVID-19 has effectively destroyed tourism, which has been a major source of hard currency for the population.
We now have a situation where many Cubans are looking for a way to both get money from abroad and preserve the value of their savings. And they are increasingly turning to cryptocurrencies. The Bitcoin’s popularity in Google Trends is higher than ever. New services like Bitremesas.comMake it easy for Cuban Americans to send money home using cryptocurrencies.
The trade works like this: Cuban Americans buy Bitcoin in the US and sell it in Cuba for cash. That way, they can help their friends and family pay bills and buy groceries. On the other side of the deal are Cubans who buy Bitcoin because they want to speculate, preserve their wealth, or do business with the outside world.
Most Cubans would prefer to stick with digital or physical US dollars many Venezuelans do it. But often the reality is that they are barely able to get access to them, and even when they do, they must constantly be cautious about their funds being seized – either by domestic authorities on physical dollar bills or by overconforming foreigners financial institutions, the U.S. Enforce sanctions.
For these reasons, it may be a great irony of the 21st century that one of the first countries with widespread adoption of Bitcoin and other cryptocurrencies could be a communist country where the average car is older than the average person.
Disclaimer of liability
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.