Central Bank regulation may indicate wider future use of cryptocurrency

 Photo by drmakete lab

Cuba’s Central Bank (BCC) has gazetted a resolution establishing rules for the use of cryptocurrencies in the country.

The legislation makes clear that the BCC, ‘for reasons of socioeconomic interest’, may agree to ‘the use of certain virtual assets in commercial transactions and grant a license to virtual asset service providers for operations related to financial, exchange, and collection or payment activity’ in and from Cuba. 

The new legislation may mean that Cuba is moving towards the limited use of cryptocurrencies in the light of the direct and indirect impact of US sanctions on international financial transfers and institutions willingness to handle remittances and other payments.

As Cuba Briefing reported in May, President Díaz-Canel said that government was analysing the convenience of using cryptocurrencies for economic operations. A month earlier, the eighth Communist Party Congress considered a resolution that a study be undertaken of whether use of cryptocurrency might help address the country’s economic problems.

The text of the new BCC legislation now makes clear that the BCC will establish the standards based on which it will regulate the use of virtual assets in commercial transactions, as well as the granting of licenses to virtual asset service providers for financial operations, relevant exchange rates, and rules for ‘collections or payments, in and from the national territory’.

It also establishes that ‘financial institutions and other legal entities can only use virtual assets among themselves and with natural persons, to carry out commercial monetary operations, and exchange and redemption; as well as to satisfy pecuniary obligations, when authorised by the Central Bank of Cuba’.

The resolution defines a virtual asset as ‘the digital representation of value that can be traded or transferred digitally and used for payments or investments’. It also establishes who a virtual asset service provider can be and states that all Cuban bodies must refrain from using virtual assets in ‘commercial transactions, commercial money or to satisfy pecuniary obligations’ unless authorised by the BCC. 

The measure also speaks to recent concerns about crypto currency scams, observing that it will be individuals who will assume the risks and responsibilities of operating with virtual assets and those virtual asset service providers that operate outside Cuba’s banking and financial system. 

The announcement was followed by a warning to Cubans from the BCC about the risk of personally investing in cryptocurrencies. In a statement the Bank said that such entities have ‘little or no transparency’ and can culminate in the collapse of the scheme and the loss of investors’ equity.

The warning followed the detention in April of the director of ‘Trust Investing in Cuba’, Ruslan Concepción (See Cuba Briefing 3 May 2021) and the recognition that in recent months there has been a surge in the number of agents in Cuba offering financial services, including the sale of securities and foreign currencies, investment advice and investment management. 

The popularity of cryptocurrency has grown in Cuba among some groups as it has become increasingly difficult to send and use US dollars on the island. Among the most popular crypto currencies in use are Bitcoin, Ethereum Litecoin, and USDT.

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