According to Reuters, Cuba is planning to work around US sanctions using blockchain technology and cryptocurrency. Cryptocurrency in Cuba would enable anonymous financial operations that could facilitate international commercial transactions.
Cuba is following the model of its top ally Venezuela, which tried unsuccessfully to bypass sanctions and fight its financial crisis and hyperinflation by introducing the Petro cryptocurrency.
More US sanctions under the Trump administration
Cuba is suffering from fresh US economic sanctions after President Trump clamped down on the regime again. The Trump administration has also limited travelling and capped remittances to the island.
The new rules also forbid visits via passenger and recreational vessels. That means that no more cruise ships, yachts, or corporate aircraft can go to the island. The measures are intended to reduce Cuba’s access to USD. However, it doesn’t only affect the government, but the private sector as well.
This new set of policies will further squeeze the Cuban economy, already weakened by the collapse of Venezuela. The Cuban government is struggling to feed its citizens after Venezuela’s state oil company cut almost two-thirds of subsidised fuel. This move left the island without a significant source of hard currency to supply food imports.
The Cuban state-run economy is inefficient, and the government is currently dealing with shortages of staple foods. Without Venezuelan help and with lower exports due to the new US trade sanctions, the country needs new ways to raise capital. Cryptocurrency in Cuba could be the answer to this crisis.
Cryptocurrency in Cuba could bypass US sanctions
President Miguel Diaz-Canel announced that the government was considering cryptocurrency as a possible way of easing the Cuban economic crisis. A digital coin could help introduce more money into the country and boost the population’s purchasing power.
According to Reuters, the Cuban authorities may seek help from cybersecurity and blockchain guru John McAfee. The colourful creator of McAfee antivirus software is currently living on his yacht in a Havana harbour.
The millionaire claims he has already contacted the Communist government and offered his help. He believes that a “clever system of currency” could help Cuba get around the US embargo.
The cybersecurity expert believes he is one of the “less than ten people in the world” who could set up a useful ecosystem for cryptocurrency in Cuba to thrive. However, the Cuban authorities have yet to mention anything about outside help. The few official statements only talk about the local talent who could develop cryptocurrency in Cuba.
How cryptocurrency could help
Cryptocurrency in Cuba would enable the government to raise capital and pay for its reforms. If done correctly, a cryptocurrency-based strategy would make Cuba less dependent on the USD. This way, sanctions would harm the economy less, and the local government would have more freedom.
At the same time, it could allow the country to import more food for its citizens who have been dealing with rationing of basic products for years. The biggest island in the Caribbean imports as much as 60 to 70% of its food, so the country needs fast trade solutions to get access to staple foods.
Working with cryptocurrency could also help the government counter inflation, which will automatically increase purchasing power on the island. Currently, the local population is struggling due to a high gap between salaries and the costs of living.
Last but not least, cryptocurrency could introduce a form of decentralisation in a state-run economy built on Soviet principles. The government in Havana has been working on a set of measures meant to reduce centralisation and encourage local production. Cryptocurrency in Cuba could bolster these measures even further, with positive effects on the local economy.
A Cuban cryptocurrency?
President Diaz-Canel hasn’t given any details on the type of cryptocurrency or how it will be implemented. It remains unclear whether the authorities are looking to adopt an existing public coin (like Bitcoin) or create a new cryptocurrency, like Venezuela’s Petro.
The Petro was also designed to bypass international sanctions. However, the digital coin controlled by the government of Venezuela saw little international interest. So, its use has remained pretty limited. But it’s still too early to predict a similar future for a potential Cuban cryptocurrency and what resources it could be backed by.
The help of a cybersecurity expert like McAfee could make a significant difference for widespread adoption here. But are Cuban authorities ready to collaborate with a US citizen who’s also planning a campaign for the oval office?