Cuba’s communist government has said it is studying the potential use of cryptocurrency to help prop up its ailing economy.
Hit by falling exports, a sharp decline in financial aid from its closest ally Venezuela and a tightening by President Donald Trump of the decades-old sanctions against the island state, Cuba is looking at alternatives to boost its economy.
Speaking on state-run television on the night of July 2, President Miguel Diaz-Canel said his government was looking into the use of cryptocurrency.
To what extent these plans would be formed was unclear. However, he said the plan would help raise capital for nearly one-quarter of the island’s population, and help pay for reforms.
Venezuela’s Folly into Crypto
Last year close ally Venezuela – also hit by US sanctions and hyperinflation – launched its own cryptocurrency called the Petro, backed by the country’s oil reserves. The country’s economists believed that by pegging the oil-backed Petro to the bolivar the almost worthless sovereign currency could be stabilized.
The Petro, however, has largely failed to gain traction and is not being used as an alternative currency according to a report by Thomson Reuters and is difficult to find on any cryptocurrency exchange – even the six that initially said they would list it.
Tanya Abrosimova, cryptocurrency analyst at FXStreet, said:
The problem with Petro boils down to the fact that it is controlled by the government that has already discredited itself. The cost of the digital coin does not fluctuate freely based on supply and demand; it is controlled by the government instead. If Cuba manages to avoid making the same mistakes, its cryptocurrency may have a positive economic effect.
More Study Needed
Appearing on the state TV with the President Cuba’s economic minister Alejandro Gil Fernandez said:
We are going to study the application of the cryptocurrency in national and international commercial relations. It does not mean that we have a Cuban cryptocurrency on Monday, but here we have to study everything.
It was suggested, however, that among the first measures to be implemented would be salary increases for public service workers – whether or not the introduction of cryptocurrency trade would help fund this was not discussed.
Nor did Diaz-Canel or Fernandez elaborate on whether Cuba would attempt – like Venezuela – to create its own “national” cryptocurrency, or if the country would implement measures using pre-existing digital assets.