With increasing usage of crypto in the country, the Caribbean nation’s central bank has decided to regulate cryptocurrency
After El Salvador announced Bitcoin as legal tender in June 2021, many small nations have been eying cryptocurrency as an alternative mode of payment. Cuba is one such nation that has now taken a first step towards it.
The Central Bank of Cuba (BANCO CENTRAL DE CUBA – BCC) has issued a resolution is establishing rules to regulate the use of virtual assets in commercial transactions and licensing of service providers in that sector.
The virtual assets term includes various meanings used for the same purposes, such as digital asset, crypto asset, cryptocurrency, virtual currency and digital currency, the bank explained.
Cuban crypto regulation
The resolutions published by BCC on 26 August 2021 said that looking at the socioeconomic interest, the bank authorizes the use of certain virtual assets in commercial transactions.
The bank reported that it will also give licenses to virtual asset service providers and allow them to conduct certain financial activities, such as collecting payments.
The service providers can offer virtual assets for operations related to financial activity, trade, daily payments, in and from the national territory.
“Financial institutions and other legal entities may only use virtual assets among themselves and with natural persons to carry out monetary and mercantile operations, and exchange and swap transactions, as well as to satisfy pecuniary obligations,” the bank mentioned.
However, the bank refrained agencies of central state administration, political organizations or social organizations and other institutions from using virtual assets and their services, in commercial transactions, unless authorized by BCC.
It will be the duty of the financial institutions to adopt measures and avoid being used for carrying out transactions with virtual assets between persons and providers of these services that are not authorized by the Central Bank of Cuba, the bank resolution added.
The risk of cryptocurrencies
Commenting on the risk involved in crypto assets, the bank said, a person must assume the risks and responsibilities derived from operating with crypto assets that operate outside the banking and financial system, even when transactions with crypto assets between such persons are not prohibited.
According to the BCC, even when such crypto assets are outside the purview of banking and financial systems, their management implies risks for monetary policy and financial stability because of the volatility that characterizes digital currencies and their use in data networks in cyberspace.
The bank also said that cryptocurrencies carry the risks of being used to finance criminal activities because of their anonymous nature.
The new regulation will come into force 20 days after its publication in the Official Gazette of the Republic of Cuba, the bank said.
With this move, more nations in the Caribbean will opt for crypto and this will also create a new ecosystem, which will soon spread to South America, Africa, South Asia.