The future of cryptocurrency in Cuba
CDA: The introduction of cryptocurrencies has been celebrated as a means to open Cuba up to unregulated global markets, free of numerous obstacles, including those caused by U.S. sanctions. How could cryptocurrencies increase the average Cuban’s ability to access capital? How do you think Cubans can benefit from participating in an unregulated and trustless financial system?
Alex Gladstein: First, we have to look at the word “unregulated,” and understand that regulations are not moral all the time. The monetary regulations from the Cuban government are, in my mind, immoral. I think what’s happening inside Cuba with regard to currency and its MLC [Moneda Libremente Convertible or freely convertible currency] system where the state pays in MLC but forces people to purchase goods in foreign currency, the devaluation of its currency, and so on, is very corrupt and painful for the citizenry. In the context of discussing regulations and morality, I view cryptocurrencies, at least Bitcoin, as a liberation tool. With Bitcoin, people can put their time and energy into something other than the peso that, over time, will actually appreciate [grow] their purchasing power instead of losing it.
The other part to consider is the embargo. Country-wide sanctions and what the U.S. government did with regard to restrictions on remittances through traditional channels, such as Western Union, has made it really difficult for families to connect with each other and really hurts the average person. I also see these regulations as immoral. In that aspect, Bitcoin is really helpful, because it allows families in Cuba, individuals, businesses, and so on to directly receive value from the United States. Bitcoin is an open monetary network which means that you can connect with any Cuban Bitcoin platform, such as Bitremesas or any other informal Cuban business that does a peer-to-peer exchange, through Bitcoin. That’s the whole point. The U.S. government has no jurisdiction over the open monetary network of Bitcoin and lightning; they can’t control it. As soon as you can touch the open Bitcoin monetary network, you can then transact with any other Bitcoin compatible platform in the world and you can send money directly to your family.
I would argue Bitcoin is even better than the existing options from Europe and Canada, where you can move your money, but it’s still not the easiest thing in the world. Sending a lightning transaction from one Bitcoin wallet to another is the easiest thing in the world. I think the [introduction of cryptocurrencies] is a big humanitarian upgrade for people who are willing to learn about it and start using it both as a savings instrument and as a cross-border payments tool.
As a human rights activist, another important aspect associated with Cubans’ integration into this system is that they can become their own banks. Cubans can control their own Bitcoin, unlike in traditional banking. With a widespread penetration of this monetary technology throughout Cuba, where humans are their own bank, there can’t be a “rug-pull” like there was in 2004. In 2004 [referring to changes in regulations with U.S. dollars], citizens had dollars until all of a sudden, the government changed their payment system and took dollars away from Cubans. That can’t happen if the citizens are holding their own Bitcoin.
I think it’s inarguable that Bitcoin is playing a big humanitarian role by getting value into Cuba and helping Cubans save. In the future, if used properly, it can prevent future rug-pull scenarios.
CDA: Circumventing sanctions through digital currencies could allow Cubans to receive remittances with ease through platforms like Bitremesas. Still, digital currencies, such as Bitcoin, can have transaction fees that exceed the monthly income of an average Cuban citizen. While Bitcoin recently announced the implementation of a scaling solution lightning network which they promise will better facilitate small transactions such as remittances, how, if at all, can it be ensured that Bitcoin’s scaling solution lightning network works as intended in a country like Cuba? Are cryptocurrencies accessible and affordable for ordinary Cuban citizens?
Alex Gladstein: Lightning is very important. While fees are quite low right now at about less than $1, $1 is still a nice chunk for someone living and making an average salary in Cuba. So we want to make fees as low as possible. One of the problems with traditional institutions like Western Union, which I still believe should be reinstated, is that the system, in my opinion, is also exploitative because it uses official exchange rates and has high fees. With Bitcoin through the lightning network, it would cost a fraction of a cent to send any amount from the United States to Cuba, it’s done instantly, and it’s final settlement. Currently, it’s pretty trivial to sell Bitcoin for MLC in peer-to-peer marketplaces in Cuba. So, even if we consider that there are few things that you can buy with Bitcoin in Cuba currently and Bitcoin would likely have to be sold for currency first, the process is still easy and affordable for the average Cuban. There’s no counterparty risk and it’s instant. This is a much bigger upgrade.
Ordinary Cubans can benefit immensely from cryptocurrencies now. For anyone with family or friends in Cuba, you can get money to them within minutes, without interference, and the Cubans get to decide what to do with it. They can decide if they want to risk some short-term volatility and hold it for future benefit in three, four or five years from now. Or, if they need to spend it immediately on food or other necessities, then they can convert it to MLC and use it as is needed. Without Bitcoin, you don’t have this option.
According to the inventor of Bitremesas [a person-to-person Bitcoin exchange platform designed for the transfer of remittances from abroad to Cuba], hundreds of thousands of Cubans have used Bitcoin, or are in the Bitcoin economy in some way. Their use of Bitcoin is a peaceful protest against monetary repression first and foremost by, what in my opinion, is a horrible currency system created by Cuba’s government, which is robbing people of their time and energy, and stealing hard currency from the outside world. It also protests, what I think are ineffective and immoral, broad-based country sanctions from the U.S. that are operating on a vendetta of sorts from decades ago. The sanctions are not relevant to the average Cuban or to young Cubans who are suffering and facing a food shortage. While holding individuals in the regime accountable is necessary, country-wide sanctions are overly punitive and ineffective, and preventing Cuban Americans from sending family to their relatives is cruel. So in response, cryptocurrencies are a technology that allows everyone to keep connecting with their family no matter what.
CDA: In terms of the relationship between U.S. policies and economic freedoms in Cuba, within the context of digital assets, are U.S. policies, in any way, preventing the use and potential benefits of cryptocurrencies in Cuba? How could the U.S. bolster the economic benefits of cryptocurrencies for ordinary Cubans? Is there a relationship between the expansion of cryptocurrencies in Cuba and supporting U.S. interests?
Alex Gladstein: Currently, it’s about getting U.S. policymakers to understand that if their goal is to empower, to help, and to be a bridge to people who are suffering, then they need to consider using this tool. U.S. officials are going to have to think: Is it our goal to punish or is our goal to empower? Allowing U.S. financial technology (FinTech) in Cuba would be huge for empowerment.
Outside of maintaining the unreasonable and harmful policies that the Trump administration imposed, the current Administration has done nothing. Meanwhile, Cubans are suffering. The government should be fixing our failures and building bridges, not walls. This is very clear to me. What’s remarkable is that we spent hundreds of millions of dollars on democracy promotion in Cuba over the last 20 years and they haven’t really delivered what we expected. The regime is still there, and people are suffering worse than they have been since the Special Period. This open source currency, which the U.S. government has somewhat of an adversarial relationship to, is doing more for freedom in Cuba than any of our democracy programs.
I think that the best thing we could do is expand access to Bitcoin inside Cuba. It leads to more freedom for the Cuban people and it leads to an erosion of power in the Cuban regime. Currently, as with any authoritarian system, one of the key ways they hold power is through the economy and through, especially in this case, a centralized state planned economy. So, if more and more people are being their own bank, then that means there’s less power for the Cuban central bank and less power for the Cuban government.
With companies such as Strike [which allows users to send payments globally with little to no fee using Bitcoin], which is currently prohibited from operating in Cuba due to U.S. restrictions, Cubans would only need the app, not even a bank account, to receive payments. The app is pegged to the U.S. dollar, which would allow Cubans to avoid volatilities and still receive these incredible instant Bitcoin remittances from anywhere. If the Administration is looking for ways to help, they could lift sanctions on American FinTech and allow people in Cuba to utilize the technologies, which is well within their power.
If you want freedom in Cuba and if you want individual human liberty for Cubans themselves, then we should be working to promote this open source currency inside that country, or at least helping allow American companies to do so if they wish. I don’t necessarily think the U.S. government should be “involved,” but they should, at least, allow private citizens to do what they want to do.
CDA: Some Cubans have cited concern over the stability of their local currency as reason to pursue the adoption and use of cryptocurrencies. Still, the exchange rates of cryptocurrencies are often highly volatile. How could the adoption of cryptocurrencies provide stability for everyday Cubans and Cuban entrepreneurs? What risks, if any, may be associated with utilizing cryptocurrencies for everyday Cubans and Cuban entrepreneurs?
Alex Gladstein: Right now, as I said before, people are using cryptocurrency as one of two tools. One is as a medium-to-long term savings instrument. In this case, it’s been much safer and more stable than the peso, or even the dollar. It’s value has appreciated [grown] dramatically over the last few years, much to the benefit of any Cubans who started using Bitcoin a couple of years ago.
Separately, it has a function of a cross-border payment tool. That process is instant with the lightning network and agnostic of jurisdiction, which is incredibly powerful. You don’t necessarily need to be saving to benefit from that second aspect. For example, family members in Miami could send a Cuban in Havana $100 in Bitcoin to their wallet and the transfer would be immediate. They could then transact it and sell it off for MLC, pesos, or whatever is needed to be used to support their everyday needs or to invest in their business. These options are just going to continue to grow and grow and grow.
Also in terms of stability, if the Cuban government in a year or two decides that they’re going to do what they did in 2004 [referring to changes in regulations with U.S. dollars], it’s not going to have the same disruptive impact for Cubans if Cubans understand the system. As opposed to MLC, which offered no real way for people to keep their dollars in 2004 other than keeping it in their mattresses, Bitcoin was born to oppose such an attack; preventing any sort of seizure is rooted in its core identity. With an understanding of the system, which is why education and being your own bank is so important, Cubans can enjoy all the benefits of Bitcoin’s functionality.
In terms of risks, long-term I wouldn’t be surprised if, as a result of its recent announcements, Cuba’s government attempts to provide state-run exchange points in Cuba to try and accumulate Bitcoin. That’s when we would have a different conversation from a human rights perspective to discern how we could ensure Cuban citizens can keep their Bitcoin. This is what you’re seeing in El Salvador right now. We want people using the open source apps instead of using the government app, which limits the government’s power. If everybody’s using the government apps, then it could give the government more power. Once we get to a future point where there’s more adoption of cryptocurrencies inside Cuba, and the government tries to take more control, then we’ll have a different conversation, but we’re just not there yet.
CDA: Cryptocurrencies have the potential to empower everyday Cubans, particularly in the digital space. Internet connectivity and telecommunications infrastructure are generally less developed outside Cuba’s capital, Havana. Not everyone has the same access to, nor knowledge of the digital world. How, if at all, can the adoption of digital currencies empower Cubans working outside of the digital space in the Cuban economy? What differential effect would the adoption of digital currencies have across Cuba’s private sector? How could this reform facilitate the economic growth of Cubans outside of Havana?
Alex Gladstein: If you can use MLC in Cuba, you can use Bitcoin in Cuba. It’s not too technologically complex to be successful and utilized anywhere in Cuba currently.
Globally speaking, Bitcoin is only used by about two percent of the world population. The best way to think about it is in comparison to the internet in 1997. That’s where we are with access to cryptocurrencies now. Only a handful of people used the internet in 1997, but guess what happened from 1997 to 2007. We went from dial-up to where we are now.
As of 2019, six million Cubans had a mobile cellular subscription. That’s the floor of the number of people who could utilize and benefit from digital currencies. Without more recent data, if we look at the growth rate of the previous two years, we’re looking at a minimum of seven million Cubans who own a cell phone or have an internet connection at home. That’s over seven million people who can benefit from this incredible technology. I think that that’s a massive upgrade. Currently, there’s only a couple hundred thousand people using it. We need to go from a couple hundred thousand to five million before we worry about securing the entire population.
So, we need to continue to observe, educate, and push forward. There are millions of Cubans who have the limited technological capabilities required to utilize Bitcoin. I think worrying about the fact that some people won’t be able to use it immediately is extremely unhelpful.
CDA: Cryptocurrencies have been touted as a means to lessen global income inequality and give average citizens access to increased amounts of capital by granting access to global unregulated markets. However, cryptocurrencies have also faced criticism for leading to a consolidation of wealth partially due to disparities in access to technology and information. In Cuba, do you see the integration of cryptocurrencies leading to a democratization of finance or a consolidation of wealth? Is a ‘democratization of finance’ feasible in or compatible with Cuba’s current political and economic system? Could such an integration inadvertently and disproportionately benefit Cuba’s government or create more obstacles for the Cuban people due to the increased strength of the state economy?
Alex Gladstein: Short answer: yes. Cryptocurrency democratizes the question of what to do in the future. The use of Bitcoin by citizens in Cuba is inherently democratizing, because it’s giving them power over the government and allowing them to be their own bank and to connect to the world, regardless of what the government wants to do. The use of cryptocurrencies is very anti-authoritarian as it is allowing them to escape repression that is incontrovertible.
The question of what may happen if the government decides to start accumulating Bitcoin is highly speculative at the moment. They may never decide to do that. Today, they’re not. However, later on, we may have to have a conversation about what happens if the government in Cuba starts to try to accumulate Bitcoin. We wouldn’t want them to do that.
Regardless, we want people to be connected to the outside world to be able to learn and transact and earn and receive on the open web. And Bitcoin is the open web for money. We want to make sure the Cuban citizens are educated and have open source knowledge of how to use these tools and support them in becoming their own bank. I think that’s really key.
CDA: Mining certain cryptocurrencies consumes immense amounts of electricity and requires substantial technological investment. Cuba is currently facing immense shortages in electricity, lacks substantial telecommunications infrastructure, and has traditionally struggled with energy production since the fall of the Soviet Union. How much investment is required from the nation’s government? Are there limits to the use of digital currencies in Cuba due to diminished or limited telecommunications infrastructure? Is it realistic for the country to jump headfirst into expanding this sector?
Alex Gladstein: The use of cryptocurrencies by average Cubans requires no cooperation from the Cuban government. Zero. This is a people-powered, voluntary movement. It requires no cooperation from Cuban authorities for the Cuban people to have a Bitcoin revolution. The concern of resources, energy, and investment is not relevant as it pertains to the Cuban people and their interaction with cryptocurrencies.
If the Cuban government was smart and employing long-term thinking, it would be using its resources to mine Bitcoin right now. It would be using renewable energy resources that are otherwise going wasted to mine Bitcoin. However, as it pertains to the Cuban people, further investment from Cuba’s government has no impact on their ability to use it now.
CDA: The integration of cryptocurrencies has also been advertised as a conduit for democratization. Specifically, eyes are on countries such as El Salvador, Iran, and Venezuela, who have all begun embracing cryptocurrencies, to see how cryptocurrencies may lead to democratization. How realistic is the tie between democratization and the adoption or integration of cryptocurrencies? Are there lessons for Cuba in the experiences of other countries?
Alex Gladstein: It’s too early to tell, so as of now, we don’t know. We barely have one country (El Salvador) adopting Bitcoin. We’re at the beginning of this. But, again, quite fundamentally, Bitcoin tilts power to the individual and away from the state. It’s essentially anti-authoritarian technology, which is why I view it as very pro-democratic, because it’s a check on government power.
For all institutions of democracy, whether that be rule of law, free speech, or independent media, Bitcoin is allowing people to be their own banks and to have control over their time and energy, which is a very healthy thing that’s incredibly compatible with democracy. I think that relationship and transformation is going to be very helpful and help Bitcoin and democracy coexist moving forward.
CDA: Is there anything else that you think people should know about the recent adoption of cryptocurrencies in Cuba?
Alex Gladstein: If the current money system worked, nobody would need to use Bitcoin; it would have no value. So thinking about it like that, we see that money is broken in both the U.S. and especially in Cuba. The peso system is collapsing and the MLC system is exploitative. U.S. sanctions on FinTech companies are immoral and Cubans are trapped. But thankfully, there’s this open source money that can be used to save, connect, transact, do business in, and be part of the world. I’m very grateful for that – it’s very inspiring and moving.
And, again, I hope that people conducting U.S. foreign policy are being guided by how to help people and not by how to punish. If your goal is to alleviate the suffering of Cuban people, aside from traditional talking points that organizations like CDA suggest, how can we do that through FinTech? To start you could stop sanctioning these FinTech apps and you could explore Bitcoin. I think it’s in the best interest of the United States to have a Cuba that has a high Bitcoin adoption. That would mean a Cuba where the individuals have a good amount of power for themselves, and where the government’s power to redistribute and confiscate is very limited. And ultimately it would mean a Cuba that’s more open to the world, more connected to the open monetary network. That is the potential of Bitcoin.