Why Cuba needs Bitcoin as a reserve currency

Why Cuba needs Bitcoin as a reserve currency

Dean Decho June 1, 2022
6 min read

It is no secret that Cuba’s economy is in crisis. Not only is the Cuban peso (CUP) worthless, it is also highly volatile. This has led to many economic problems in Cuba, and the situation is only getting worse.

After a week-long stay in Havana, in this post we discuss the country’s current financial situation and why Cuba might need bitcoin as a reserve currency.

We will look at the benefits bitcoin can bring to the Cuban economy and how bitcoin can help save Cuba from financial ruin!

Cuba’s charm, architecture, classic cars and natural beauty have made it a popular tourist destination for many years, but the country’s economic problems are becoming increasingly difficult to ignore.

The country is facing one of the worst economic crises in its history and the Cuban peso is losing value at an alarming rate.

Problems with the Cuban peso

International isolation

The Cuban currency is currently in a state of complete isolation. It is not backed by any other currency, such as the dollar, euro or gold, and is not traded on any currency market.

This isolation has led to the incredible instability of the Cuban peso. In fact, since 2013, the Cuban peso has lost more than 95 per cent of its value against the US dollar! This instability has led to chaos in the Cuban economy and the situation continues to worsen.

Lack of security

One of the main problems of the Cuban peso is that it has no value. The Cuban government has no reserves with which to back the currency, nor does it foresee a way to stabilise it. The lack of guarantees has led to the continuous devaluation of the Cuban peso.

Absence from commercial markets

Another problem with the Cuban national currency is that it is not traded on the currency markets of other countries. This means that Cuba has no way to get rid of its surplus pesos.

The only way to get rid of excess pesos is to spend them, which in turn leads to inflation. The Cuban government is trying to address these problems by pegging the Cuban peso to the US dollar.

However, this has only worsened the situation. The peg has made the Cuban peso even more unstable and the Cuban economy even more dependent on the US dollar. Inflation is rising at an enormous rate and basic necessities are becoming scarcer. Cubans are struggling to make ends meet and it is clear that something has to change.

Bitcoin as a reserve currency would stabilise the economy, increase foreign investment and help Cuba get back on its feet. Bitcoin is a decentralised currency that is not subject to the whims and control of governments or central banks.

Cuba will be able to avoid the disastrous effects of inflation and preserve its wealth regardless of what happens to the Cuban peso. Bitcoin will also bring an influx of foreign investment to Cuba.

Currently, there are very few opportunities for foreigners to invest in this Caribbean country. This is because the Cuban government tightly controls the economy and does not allow outside investors to own companies, assets or real estate in Cuba.

However, if the country adopted bitcoin as its reserve currency, it would help open up the economy and allow foreigners to invest in Cuba. Cuba is experiencing a deep economic crisis.

Shop shelves are empty, new cars are extremely scarce, and people are leaving the country in droves. This Caribbean country is a victim of its own centrally planned economy. Could bitcoin be the solution?

Cuba needs bitcoin

bitcoin accepted here sticker on a restaurant in Havana
Somewhere in Havana

There is no doubt that Cuba’s current monetary system is not working. The Cuban peso is unstable, is not backed by anything of value and is not traded on the currency markets. This isolation has led to many economic problems in Cuba, and the situation is only getting worse. Cuba needs bitcoin as a reserve currency. Bitcoin is a decentralised digital currency that is not controlled by any government or bank. This makes bitcoin a good option for Cuba.

Adopting Bitcoin as a reserve currency: is it possible?

The introduction of Bitcoin as a reserve currency will not be easy for Cuba. The Cuban government will have to overcome many obstacles to introduce Bitcoin as a reserve currency.

US-imposed embargo

The biggest obstacle for Cuba is the embargo. It prohibits US citizens from doing business with Cuba. Any company that wants to do business with Cuba must obtain a licence from the US government. Bitcoin companies would also have to obtain a licence from the US government to do business with Cuba. This is because, under US law, bitcoin trading companies are considered money transmitters.

Creating a bitcoin infrastructure

The Cuban government will have to find a way to convert the existing currency – the Cuban peso – into bitcoin. This can be done in various ways, such as exchanging CUPs for BTC on an exchange or creating ATMs where Cuban pesos can be exchanged for bitcoin. Cuba also needs to create an infrastructure to enable the use of bitcoin. This includes creating a way to store bitcoin, developing a way to accept bitcoin payments and educating the public on how to use bitcoin. Cuba’s introduction of bitcoin as a reserve currency may present many challenges, but it is not impossible. If Cuba could overcome these obstacles, it could stabilise its economy and help its citizens become prosperous.

Lack of Internet access in Cuba

Only about 25% of Cubans have access to the Internet, which makes it difficult to use Bitcoin. However, if the Cuban government can overcome these obstacles, Bitcoin could prove to be a lifesaver for the Cuban economy! Cuba is in a unique position to benefit from Bitcoin. The country has many problems with its current monetary system and Bitcoin could help solve them. This Caribbean country also has many obstacles to overcome if it wants to introduce Bitcoin, but if the Cuban government can overcome them, Bitcoin could prove to be the Cuban economy’s salvation!

Cuban peso exchange rate on the street

The Cuban government has also introduced strict controls on the exchange of Cuban pesos. Cuban currency controls make it difficult for Cubans to exchange pesos for dollars or euros.

This makes it difficult for Cubans to buy goods and services from abroad and for foreign investors to invest in Cuba. At the time of writing, the Cuban peso is officially quoted at 1 euro per 25 CUP.

Locals are willing to pay 100 pesos to receive 1 euro from tourists. That is four times the official price of a CUP! And this is because they desperately need euros to buy goods like soap and toilet paper, which are priced in euros. The problems with the Cuban peso will only get worse.

The Cuban government has no choice but to print more money. This will lead to even more inflation and the Cuban economy will continue to deteriorate.

All these problems with the Cuban currency have led to many economic problems in the country. The economy is very unstable and the situation is only getting worse. Inflation is skyrocketing and the value of the Cuban peso continues to fall.

What benefits would bring Bitcoin to Cuba

cuba

Bitcoin would bring many benefits to the Cuban economy. Firstly, it would stabilise the Cuban peso.

The value of bitcoin is not based on anything physical, but rather on market demand. This means that the value of bitcoin is much more stable than the value of the Cuban peso. Another advantage of bitcoin is that it is not controlled by any government or central bank.

This means that Cuba will be able to control its own monetary policy without fear of interference from foreign governments or banks. Furthermore, bitcoin is traded on many different exchanges around the world.

This gives Cuba the opportunity to get rid of excess pesos without having to spend them. Cuba can simply sell its pesos on the open market in exchange for bitcoin and then use them to purchase goods and services from other countries. Adopting bitcoin as Cuba’s reserve currency would be a bold move, but it may be the only way to save Cuba from financial ruin.

The benefits of bitcoin are too great to ignore and Cuba must act now, before it is too late!

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Dean Decho

Dean is a passionate advocate for the financial freedom and independence offered by Bitcoin and the cryptocurrency space. He's built this crypto learning platform to help others in the industry learn, grow and be part of it.