Cuba Approves Crypto Services, Subject to Bank License

Cuba’s central bank has authorized virtual asset service providers and the issuance of cryptocurrencies on the Caribbean island.

The Central Bank of Cuba issued regulations for virtual asset service providers in the government’s official gazette earlier this week. According to the announcement, anyone wishing to issue a digital currency must obtain a license from the monetary authority.

In issuing a license, the central bank said it would consider the legality, socioeconomic interest, and characteristics of any project before approval. Initially, licenses will be valid for one year.

Cuba skirting sanctions

Following the introduction of mobile internet three years ago, the Cuban government approved the personal use of cryptocurrencies for payments last year. Enthusiasts hope the digital currencies, which function independently of any centralized authority, will help them overcome obstacles created by U.S. sanctions.

Cut off from international financial markets and payment systems by the decades-old U.S. trade embargo, citizens of the Communist country struggle to obtain credit or debit cards for international use.

“If the central bank is creating a cryptocurrency-friendly legal framework, it is because they have already decided that it can bring benefits to the country,” said former Cuban central bank economist Pavel Vidal.

He believes the government is attempting to facilitate the entry of remittances and international foreign trade operations. “This can reduce the cost of these international transactions and generate an alternative to operations in dollars, less sensitive to the sanctions scheme,” he said.

El Salvador situation

Vidal also expressed his doubts that Cuba would follow in the footsteps of regional neighbor El Salvador, who legalized Bitcoin as legal tender last year. The Central American country issued bitcoin bonds last month amid mixed market sentiment.

President Nayib Bukelel said he had hoped to raise $1 billion to buy more bitcoin and to fund a “Bitcoin City” powered by geothermal energy, with any excess funds going towards debt.

Despite the President’s continued enthusiasm, even offering citizenship to friendly foreign investors, so far the introduction of bitcoin has had mixed results. A recent survey carried out by El Salvador’s Chamber of Commerce revealed that the majority of the companies in the country had yet to bitcoin for their businesses.

According to the survey, only 14% of the respondents had made transactions in bitcoin since it became a legal tender in the country last Sept.