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Cryptocurrencies, a new resource available to businesses in Cuba

| News | Cuban Desk

It is not clear if the use of cryptocurrencies in Cuba could circumvent the blockade provisions or not, but it could facilitate payment between Cuban companies, including those that are the subject of foreign investment, in their commercial relations with other Cuban and foreign companies.

From the creation of the Bitcoin, the first cryptocurrency, in 2019, the world economy began to change. The possibility of replacing the use of physical money with a simple mobile transaction has facilitated its use. Moreover, due to its immediacy, it also began to be used in commercial transactions between companies. In addition to these advantages, they are not issued or controlled by banks or governments. It is for all these reasons that in 2021 their use will already exceed one hundred million users worldwide.

These characteristics of cryptocurrencies may have been one of the reasons why the Cuban authorities began to think about the possibility of their use on the island. In this way, they are trying to partly circumvent the regime of sanctions imposed by the United States to facilitate the entry and exit of money from the country, which have been tightened, especially since the measures adopted by former President Donald Trump.

As part of the analysis carried out by the island's institutions, on 20th August 2021, Resolution No. 215/2021 of the Central Bank of Cuba, hereinafter Resolution 215, came into force, which aims to regulate the use of certain virtual assets in commercial transactions, as well as the granting of licences to virtual asset service providers for operations related to financial, exchange and collection or payment activities, in and from the national territory.

The regulation defines a virtual asset as a digital representation of value that can be traded or transferred digitally and used for payments or investments, which comprises various meanings used for the same purposes, such as digital asset, cryptoasset, cryptocurrency, virtual currency and digital currency. It defines a virtual asset service provider as any natural or legal person that engages in the exchange between virtual assets and legal tender; the exchange between one or more forms of virtual assets; the transfer of virtual assets; the safekeeping or administration of virtual assets or instruments enabling control over virtual assets; and the participation in and provision of financial services related to the offer of an issuer or sale of a virtual asset.

Resolution No. 215 recognises the use of cryptocurrencies by financial institutions and other legal entities and individuals to conduct monetary and mercantile transactions between them, as well as exchange and swap transactions, and to satisfy monetary obligations, subject to prior authorisation by the Central Bank of Cuba. In other words, the use of cryptocurrency by any natural or legal person will be subject to this legal imperative.

This control mechanism to which the use of cryptocurrencies in Cuba is subject is based on the fifth 'Por Cuanto' of Resolution No. 215, related to the fact that, ".... even though these virtual assets and the providers of these services operate outside the Banking and Financial System, their management implies risks for monetary policy and financial stability, due to the high volatility that characterises them and their being carried out in data networks in cyberspace, generally decentralised, without any issuance control, regulation, official supervision, sanctioning regime or support from monetary authorities, which also entails dangers of their use to finance criminal activities, given the excessive anonymity of the users registered on such networks and of the transactions resulting from their use". Cuba's commitment in relation to the prevention and detection of operations in the fight against money laundering, the financing of terrorism and the proliferation of weapons of mass destruction was also considered, in which the Central Bank of Cuba acts as the guiding authority to establish the necessary guidelines to prevent and avoid the use of the banking and financial system in the commission of these scourges.

As part of the control that must be exercised over the use of cryptocurrencies, Resolution No. 215 establishes that the bodies or agencies of the Central State Administration, political, mass and social organisations and other institutions, must control and supervise that their subordinate entities and the associative forms of which they are the relationship bodies, refrain from using virtual assets and the services of these, in commercial, monetary and mercantile transactions or to satisfy pecuniary obligations, except in the cases authorised by the Central Bank of Cuba.

Resolution No. 215 only establishes general principles, as it limits itself to structuring the use of cryptocurrency by natural and legal persons, based on prior authorisation from the Central Bank of Cuba, without specifying certain aspects that could be of interest for its implementation. For this reason, it is highly likely that in the not-too-distant future regulations will be issued to further develop its use on the island.

This new Cuban legislation, which came into force on 9 September, has attracted the attention of many media and experts, who even doubt that it can fulfil its objective of evading the provisions of the blockade against Cuba. However, the truth is that it could well facilitate payment between Cuban companies, including those that are the object of foreign investment, in their commercial relations with other Cuban and foreign companies. Consequently, it could become a mechanism that favours foreign investment in the island, by facilitating internal and external payments and collections.

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Adargelio Garrido, 'of counsel' at Andersen

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