News regarding the use of cryptocurrencies in Cuba can be traced to the networks that refer to pioneers who began to use them as early as 2015, six years after the emergence of Bitcoin. Some, perhaps from before. But it is as of 2019 that different press media begin to record news that indicates a dynamic interaction of Cubans with the world of digital assets.
During 2021, the information flurry has been particularly intense and not limited to the sphere of the press. The Guidelines resulting from the 8th Congress of the Communist Party of Cuba (PCC) indicated the need to deepen the study of crypto. The Cuban government and the Central Bank, as a regulatory institution in the monetary field, issued alerts, declarations of principles and the first regulations for the use of digital assets. Such is the number of Cubans using cryptocurrencies for the most diverse objectives, and the innovations, opportunities and risk effects that everyday practices generate, that the phenomenon transcends the personal plane and deserves a deeper debate about its implications.
For the emergence and local expansion of the use of cryptocurrencies, the increase in Internet access options has been decisive in the first place, in progress since 2013 with the creation of the first ETECSA navigation rooms, later the WiFi zones in public spaces and the subsequent variants from home and through mobile data, as well as the growing familiarization of the Cuban population with the use of technology and networks. But the existence of a notable number of unmet needs has also contributed: absence of formal local options for making financial investments; restricted access for Cubans to bank accounts and products abroad, international collection and payment mechanisms, electronic commerce channels and foreign exchange market platforms; limited options for the development of personal projects in the private sector, limited to the successive lists of activities allowed to the self-employed since 2010; and a depressed consumption, whose satisfaction depends with increasing frequency on the exclusive informal circuits or on freely convertible currency.
Added to the above was the disruptive effect of COVID-19 in 2020, which ended up precipitating and accentuating the economic and social crisis that was already weighing on Cuba. Measures to contain the pandemic minimized income options at the personal level and at the country level. The stoppage of economic activity meant a contraction of the product in the order of 10.9%. The Task of Reortaskganization1 started in the most adverse context possible in the last two decades, has expressed in the short term the expected tensions of the inflationary trade-off, magnified by design deficiencies and lack of coordination with a broader reform, fundamentally in the productive sphere. In turn, the flow of remittances experienced reductions associated with restrictions on formal remittances implemented by the U.S. government, and as a result of the drop in visitor flows, their most frequent vehicle.
In this context of shortages, a growing segment of the population began to show an interest in venturing into crypto asset management platforms located outside of Cuba (although one click away on the Internet), a few already known locally in previous years. The attention was monopolized by those that have not presented discriminatory access barriers to Cubans, and have offered entry investment options as low as the equivalent of 15 dollars. Sometimes less. The incentives: high investment returns, and bonuses for networking through multi-level marketing.
Many of these platforms were obvious scams and disappeared (along with investors’ capital), others were unable to honor their performance commitments and closed their relations by returning the principal contributed (although months later, consider an opportunity cost loss). Many others have been operating for months or years, and new bidders continually appear with more or less similar proposals. The best known of these companies, Trust Investing (TI), kept paying historical yields on the 20% per month of the investment for about two years, moving in 2021 to default conditions and arbitrary penalties to Cuban investors, which will probably contribute to its eventual collapse.
Beyond the high risk of fraud/unsustainability of these high-yield investment funds (known and accepted by many participants, ignored by others), their popularization represented a source of income for many, led to gains in financial education and operational management of technology associated with the use of crypto, and fostered the creation of networks that constitute capital in terms of relationships with the potential to focus on various undertakings and on the dissemination of knowledge. Thus, these investment platforms constituted a massive attraction force in the field of cryptocurrencies (more than 230,000 Cubans participated in TI alone), and contributed to the growing understanding of the advantages of their use as a means of payment, value reserve, possibilities of monetization2 and means of investment, in the peculiar monetary-financial conditions of Cuba.
For this reason, the local uses of cryptocurrencies have moved rapidly (although it is maintained) towards endeavors and uses beyond passive investment in management platforms. Crypto are beginning to be stored in personal wallets as a value reserve with convenient liquidity, either through a variant of monetization or their use as a means of direct payment. Exchange volatility is controlled through the use of stablecoins3 such as Tether, or even used to obtain Bitcoin, Ethereum, Litecoin (to name a few) in contexts of low prices and their sale on the rise.
Part of the investment has been redirected towards trading on platforms with greater formal recognition, where users exercises greater control over their funds and decisions, and successful operations require a dynamic incorporation of knowledge. Increasing familiarity with crypto has, in turn, opened new avenues that circumvent the restrictions on sending remittances by transfer and the few options of arrival through travelers that still exist.4 Part of these remittances occur through direct sending between private wallets with minimal commissions and are locally monetized in trusted groups on WhatsApp or Telegram, but a notable number of Fintechs5 has also been generated (for example, DUC, Qbita, Criptopagoscuba, Qvapay), some of which make it possible to convert cryptocurrencies (remittances or investment returns) to currencies and send them through formal international transfers to accounts in freely convertible currency. Tropipay, one of the most important operators of remittances to Cuba, in turn implemented a deposit service through cryptocurrencies, although it is currently listed as “temporarily disabled.”
These transfers are not only a valuable source of formal access to foreign currency, but also offer resources under the conditions preferred by the Cuban authorities: available in accounts abroad to honor the country’s commitments, and held locally in personal accounts whose sole destination possible today is the consumption in the freely convertible currency circuit.
At the same time, interesting dynamics have been generated, such as financial independence for many Cubans in the consumption of goods and services on the Internet, as well as cell phone recharges, the purchase of professional software, access to Amazon, Netflix, Home Depot products, reservations on Airbnb, with the help of platforms such as Bitrefill.com. There has also been a growing awareness of Fintech, closer to traditional payment mechanisms: through various mechanisms, cryptocurrencies can be used to fund currencies in debit cards that are operative online and physically, in Cuba and the rest of the world. In the case of Albo (Mexican), for example, use could be limited by residency requirements to obtain it, however, initiatives such as Qvapay offer Mastercards to Cubans residing in Cuba. This type of payment mechanism of local and international scope has been highly desired and elusive to obtain by the majority of the Cuban population in general, and the private sector in particular.
Other uses derived from the dynamics with cryptocurrencies can be appreciated, such as that of the art market, where local artists and other enthusiasts have benefited from the sale of works and materials through the issuance of NFTs (Non-fungible Tokens) and developed interesting projects,6 in the field of network games, by obtaining rewards in cryptocurrencies (for example, Axie Infinity), and even in the local payment of goods and services, although the latter is carried out by enthusiasts who, after a careful reading of the framework regulatory, would find dissuasive elements to openly promote their offers in a currency other than the Cuban peso (CUP).
On the other hand, surveys carried out with members of the TI7 community reveal interesting insights about the social groups and objectives pursued when getting involved in initiatives related to cryptocurrencies. Most of the participants are young, male (more than 94% according to a study by Rory Curtin), and white (more than 94%, according to a study by Rory Curtin, more than 80% according to a study by Ángela Peña et.al, see note), which suggests that the local crypto phenomenon replicates exclusion dynamics linked to race and gender present in other areas, such as access to remittances and foreign exchange, private sector activities in terms of leadership in the business or the access to the best-paid occupations, and the position regarding the use of the patrimony. More than 60% of the members have completed university studies, and are still employed in the private or state sector, with a slight predominance of the latter (54% according to a study by Ángela Peña et.al). In turn, those surveyed by Curtin (2021) reported that the cryptocurrencies they manage have as their main destination investment, independence regarding the consumption of online goods and services and during trips abroad, and that the monetary resources initially allocated to obtain them came from labor income and savings. None of the members received remittances to finance their initial investment, and although a survey of a larger sample could yield different results, the group surveyed in the consulted study presents a dynamic consistent with the behavior of emerging social groups that have their own resources for their undertaking.8
The truth is that the access and use of cryptocurrencies have generated networks and collaborative learning spaces, which have made it possible to transcend the use as passive investment and move towards the diversification of sources of income. In turn, it has generated opportunities for formal access to foreign exchange (through formal monetization9 in freely convertible currency and the use of new online and physical means of payment), empowerment of low-income individuals through the generation of skills and capitalization of networks, independent access to the consumption of online goods and services, availability of resources and means of payment for consumption abroad (not only of final goods, but of inputs and productive assets that enter the country to form part of private enterprises), incentives for the creation of Fintech oriented to meeting specific needs in the Cuban context, and new channels for the access of fresh hard currencies for the country.
This has not gone unnoticed by the authorities. The “massiveness” of participation in crypto-asset management platforms and the very high risk that it entails determined the issuance of alerts from the government and the Central Bank of Cuba, with the notable distinction of advising the population not to participate in these initiatives, instead of establishing a prohibition. On the other hand, the deployment of an ongoing operation that has kept under investigation for months the best-known leaders of the local Trust Investing community was revealed, without the precise reason for their arrest having been officially disclosed to the public.
To be continued
1 Refers to the package of measures aimed at reforming the monetary and exchange environment. Formally initiated in January 2021, it entailed the withdrawal of the CUC from circulation and a devaluation of the official exchange rate of the CUP with respect to the USD, in addition to incorporating in its design a generalized modification of salaries, pensions and prices, elimination of subsidies.
2 The term refers to the conversion of the cryptocurrency to domestic currency or hard currencies.
3 They are cryptocurrencies with a stable value, based on a previously established parity with another asset. The most common is the USD.
4 On the impacts of restrictions on remittance flows to Cuba, consequences for households and entrepreneurs, and the use of cryptocurrencies as an alternative channel, the works of Denisse Delgado (2020 and 2021) can be consulted.
5 Refers to companies that offer innovative financial services, through the use of information and communication technologies.
6 See Rodríguez Y. (2021).
7 Although the samples surveyed are small and could contain biases associated with the characteristics of specific groups within the TI community, the results are consistent with reality, according to the criteria of leaders of the Cuban TI community who were subsequently consulted. See the work of Ángela Peña and other professors of the Department of Sociology of the University of Havana cited in (Expósito & Pradas, 2021) and a synthesis of the study by Rory Curtin in (Curtin, 2021).
8 See Espina (2020).
9 It refers to a process of exchanging cryptocurrencies for hard currencies through any platform that provides these services, and involves a formal international transaction to the bank account of the beneficiary of the funds.