By Bryan Campbell Romero-
In 2016, Boaz Sobrado, a UK-based data analyst, travelled to Cuba motivated by the growth opportunities in a country that since the early 1960s has been mostly detached from the global economy. That same year, then-president Barack Obama visited the island, opening a promising new chapter in the bilateral relationship that attracted the attention of major firms, such as Google, Airbnb and Netflix. However, while most focused on the political significance of the moment and obvious investment sectors such as tourism and infrastructure development, Mr Sobrado was introduced to the novel and hidden ecosystem of cryptocurrency users in Cuba: “I went to Havana and then basically travelled around the country. I realized how difficult it was for Cubans to do business online and after setting up an e-commerce platform helping people there to move money, we saw cryptocurrencies as something worth exploring. Quickly we became a prominent player in this small crypto market”.
Since the 1960s, the US has maintained an economic embargo against Cuba. Although Obama eased some trade sanctions during his presidency, the four years under the Trump administration marked an unprecedented escalation in financial restrictions on the communist-run country. Trump’s administration issued more than 200 measures affecting money flow to Cuba, including limiting trips, regulating remittances (many Cubans living in the US send money back to their families in Cuba) and banning various Cuban financial institutions.
As well as this, Cubans have limited access to international transactions as even non-US international banks and multinational companies have faced legal issues for violating America’s sanction regime. In 2019, Italy’s UniCredit paid a $1.3 billion fine for using the US banking system to move money on behalf of Cuba. Similarly, French bank BNP Paribas agreed to pay a record $8.9 billion penalty in 2014 for conducting transactions related to Cuba and other US sanctioned countries.
As Cuba’s economy has experienced sustained contractions over the last few years and informal remittances channels have been closed due to the measures imposed to contain the Covid-19 pandemic, bitcoin has emerged as an opportunity. As Mr Sobrado puts it: “the average Cuban doesn’t have access to credit cards or other financial instruments. For that reason, securing payments in international transactions, particularly from the US, is a big issue for Cuban entrepreneurs. Cryptocurrencies present a great opportunity for them. Crypto is just an efficient way to move money, and Cuba can be part of that”.
Cuba’s bitcoin trading activity has focused primarily on securing remittances, and in 2019, the remittances flow to Cuba reached $3.7 billion, despite the fact that the Cuban banking system –due to domestic shortcomings and sanctions– lacks the necessary infrastructure to provide services to the overseas remittances market.
Although the use of crypto exchanges remains small, it is rapidly developing and startups such as Bitremesas process more and more minor transfers often intended to provide family support. Bitremesas receives remittances from the US in bitcoin and then conducts a negative bidding option, where crypto users in Cuba bid to offer recipients the best price for their coins. The difference between the original amount and the lower auction price is the commission received by Bitremesas. “By buying bitcoin and using Bitremesas’ automated system, people can move money to Cuba. There is no need to use banks in order to send money to Cuba,” said Erich Garcia Cruz, founder of Bitremesas from his YouTube channel with more than 50,000 subscribers. Other startups like QvaPay and Qbita, which have 13,000 users and have moved a volume of US$354,771 in trades since launching, are also breaking into the ecosystem.
Furthermore, despite the fact that Bitcoin was initially intended to be a payment tool, globally it has mainly been used for speculation by financial traders. But in Cuba, aside from being used for remittances, cryptocurrencies have also opened opportunities for Cuba’s deprived financial sector and the use of bitcoin and other cryptocurrencies actually do serve a primary function of money in Cuban exchanges. “Unfortunately, in Cuba, we have to use crypto to correct the many deficiencies of the financial system”, said Eduardo Sanchez, a Cuban blockchain specialist.
Tech entrepreneur John McAfee actually proposed building the island nation’s first cryptocurrency in 2019. Although the idea didn’t prosper, Cuba’s government did announce that it might explore the benefits of cryptocurrencies to complement the island’s antiquated financial structure. The announcement follows in the footsteps of Venezuela, which in 2018 launched Petro, a national cryptocurrency allegedly backed by oil and mineral reserves. Along with Venezuela, other nations targeted by US sanctions have been searching for ways to move their money outside the US-dominated financial system. Cryptocurrencies offer an entirely new financial infrastructure, cutting out the need for banks and enabling peer-to-peer transfers that bypass borders as well as regulators’ jurisdictions.
Having said this, the threat of more sophisticated US sanctions remains a real risk to these benefits brought by cryptocurrencies. The US Treasury Department has proposed stricter regulations for cryptocurrency exchanges to identify owners of digital assets in the US. The measures will require crypto exchanges to collect and store the names and addresses of anyone involved in a transaction exceeding $10,000 and subsequently share this with US authorities.
Despite this, Mr Sobrado said that he doesn’t “think the sanctions against BitPay for allowing transactions in countries like Cuba ... will have a huge impact on the ground. Cryptocurrencies by design are prepared to resist some of those actions and still offer solutions”. Furthermore, Miami’s push to position itself as a pioneer of tech innovation and broad bitcoin adoption facilitates the acceptance of cryptocurrencies in Cuba. Developments in the city of Miami have great influence on Cuba itself as there are 1.2 million people of Cuban heritage living in the city. Miami Mayor Francis Suarez has proposed paying municipal workers and collecting taxes in Bitcoin. Miami is also increasingly attracting Silicon Valley investors and technology founders using cryptocurrency as a fundamental part of its pitch. For Mr Sobrado “if the City of Miami expands the use of cryptocurrencies, it’ll have a significant impact in Cuba. A flourishing tech hub in Miami will inevitably employ many workers of Cuban descent with connections to the island”.
Looking to the future, the Biden administration is expected to re-engage with Cuba, which may imply the lifting of a number of sanctions, particularly to money transfer and remittances. Cryptocurrency usage will be able to continue to grow in the island and many now understand its potential. As the Havana- based entrepreneur and cryptocurrency enthusiast, Luis Azúa Torres, stated, “national currencies are limited. For Cuba, it's fundamental to include cryptocurrencies in our system, eliminating the middleman and gaining efficiency. It is definitely the future”.