As new U.S. government measures that impose restrictions on remittances to Cuba becomes effective after November 22, Western Union, which has been operating in the island nation since 1999, will close shop. The new rule, which was published on October 27, gave Western Union 30 days to implement new restrictions. The new rule is likely to increase the appeal of crypto assets as Cubans are now expected to find a suitable alternative in a very short space of time.
At the time of the initial U.S. government announcement, the global remittances giant had promised to find a solution for its Cuban customers. However, in a later update on November 13, Western Union said it was unable to â€œfind a solution in this limited timeframe.â€
For its part, the U.S. government says remittances to Cuba can still flow, but â€œnot through the hands of the Cuban military, which uses those funds to oppress the Cuban people and to fund Cubaâ€™s interference in Venezuela.â€ According to U.S. officials, Western Unionâ€™s partner in Cuba, Fincimex is controlled by the Cuban military hence the new measures.
In the meantime, the end of the formal remittances service to Cuba by Western Union is likely to rattle the communist countryâ€™s financial position. Cuba counts remittances as one of its top sources of foreign currency and some estimates placed total remittances in 2017 at $3.5 billion.
For Cuban families that rely on remittances sent from the United States for survival, the end of Western Unionâ€™s remittance service presents a new challenge. Either the senders will resort to using the sometimes unsafe informal channels or they will simply switch to digital alternatives like bitcoin.
The Growing Use of Cryptocurrency Remittances
Already, reports suggest a growing use of cryptocurrencies by some Cuban residents. Cryptocurrencies are being used to pay for utilities and for cross border payments. Furthermore, the restrictions on human movement imposed to curb the spread of Covid-19, appear to have sparked an increase in usage of cryptocurrencies by Cuban expatriates when sending money.
For instance, peer to peer platform, Bitremesas which enables the sending of remittances via bitcoin, reported increasing business during the lockdown period. According to one report, recipients that use Bitremesas will have their local bank card credited with the Cuban Convertible pesos (CUC) or Cuban Pesos (CUP) upon the transfer of funds from abroad using bitcoin. This system is independent of banks and since it uses decentralized cryptocurrencies like bitcoin, neither the US government nor authorities in Cuba can censor transactions.
Another organization, Cubacripto uses an almost similar process where a â€œtrustedâ€ third party receives the bitcoins. In return, the trusted party will credit the named beneficiaryâ€™s bank account with the local currency equivalent. In Cubacriptoâ€™s case, all trades are initiated via social media channels like Telegram and Whatsapp.
Peer to Peer Transactions to Grow
As a result of the rule changes by the US government, many Cubans will find it logical making the switch to cryptocurrencies. Sadly, however, due to the overarching effect of the US governmentâ€™s restrictive measures, regulated peer-to-peer exchange platforms will refrain entering the Cuban to fill the void left behind by Western Union. Already, exchange platforms like Paxful and Localbitcoins have-just like Western Union-been forced to abandon the Cuban market. Cuban residents can access local.bitcoin.com, the noncustodial and peer-to-peer marketplace that allows users to trade BCH with cash and 30+ payment methods.
Consequently, both Cubans abroad and the homebound recipients of remittances will likely be compelled to create crypto wallets. The crypto wallet will not only enable them to receive funds directly from the senders but it will help recipients to bypass certain Cuban government scheme that forces families to buy expensive state-produced goods.
Furthermore, cryptocurrencies will not only help with the safe transfer of funds to the beneficiaries but will also enable recipients to shield these funds from inflation, currency depreciation, and even expropriation.
Do you agree that the new restrictions will spur on the use of cryptocurrencies when sending remittances to Cuba? Share your views in the comments section below.