Last week, Cuba delivered on its August promise to permit cryptocurrency use in commercial payments.
Like El Salvador, Cuba put this law in place to facilitate the flow of money in and out of the country and to reduce the country’s reliance on the US dollar.
Cuba’s decision to join El Salvador in embracing decentralized virtual currency could help the country to circumvent the U.S. sanctions regime, which was dialed up under former President Donald Trump and has been extended under President Joe Biden.
For one thing, sending and receiving money between the U.S. and Cuba became extremely difficult under the Trump administration. In 2020, Western Union, a particularly significant channel for remittances, shuttered all of its 400+ locations, amid increasingly aggressive Trump-era sanctions.
The process of getting money into and out of the island nation was made even more complicated by the COVID-19 pandemic. The rise in crypto adoption in Cuba was, therefore, imminent.
Cuba is doing things differently
Unlike El Salvador, the isolated island nation has not made any cryptocurrency legal tender nor has it put any laws in place which mandate institutions to accept Bitcoin (BTC) as payment.
The Cuban government has also not provided any cryptocurrency infrastructure. All it has done is set out the laws and regulations crypto-accepting companies must abide by.
Conversely, El Salvador has been actively involved in rolling out the rails for its second national currency and has even developed a Bitcoin wallet of its own for its citizens to use.
These radically different approaches to cryptocurrency adoption conveniently constitute the test to determine which approach works best. Better yet, it will help stress test the real-world effects of crypto-specific regulations. This is something that other dollar-dependent countries will be watching in the coming months and years, especially since some of them, such as Paraguay, seem to be moving closer to full-scale crypto adoption.
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Though cryptocurrency adoption has historically centered around Bitcoin, it’s only a matter of time before some smart contract cryptocurrencies are named as the next innovation solutions being adopted by governments.
Some cryptocurrencies have already managed to secure these highly coveted government contracts and one of them is Cardano which introduced some exciting contracts of its own late last Sunday.
Around the world, regulators, from communist Cuba’s central bank to the SEC (Security Exchange Commission), are trying to come to grips with the cryptocurrency industry. This implies that crypto is a global phenomenon and regulators have decided that it’s here to stay and worth engaging with.
