Bitcoin became more attractive when there was a shortage of hard currency in Cuba
Attempts to end the nation’s dual monetary system have raised concerns about instability. Demand for hard currencies, such as dollars or euros, is growing in Cuba. People are encouraged to look for less volatile means to store wealth, which is strange, such as Bitcoin. The increased demand makes it difficult for individuals to obtain forms of money that are more difficult than one of the two national currencies.
According to a Reuters report, Cuba currently uses pesos and the dollar-equivalent convertible pesos (CUC). It is seeking a second elimination, causing concern over further currency depreciation and increasing demand for less volatile means of exchange.
Hard money became hard to earn, but Bitcoin was even harder
Macro factors, such as US President Donald Trump, tighten trade sanctions on Cuba and South American nations that terminate Cuban doctors’ contracts, have limited dollar flow into the country. The government has also introduced Japanese dollar stores to bring a harder amount of money into its own reserves to protect itself from any fluctuations that might come with giving up the CUC.
Roly, a 28-year-old mule that imports black-market goods to the country, claims that making hard money from financial institutions has basically been impossible in recent weeks.
He said: “There is no money available at the banks or exchange houses for weeks, you have to look elsewhere. I spent half a day on the street in the sun and I tried to buy a dollar.”
Local economist Omar Everleny commented on the situation, saying that the CUC had begun to lose value.
Historically, forms of hard money outperformed those who were more volatile. When given a choice, people almost always favor money that is unlikely to suddenly lose a lot of value thanks to the intervention of its issuers or control over monetary policy.
Bitcoin could become more attractive to citizens, with the people of Cuba struggling to find dollars or euros against their devalued national currencies. Bitcoin, with its strictly limited supply and issuance of regiments, represents the hardest form of money that humanity has ever known.
Not only does Bitcoin represent a harder currency than the dollar or euro, but it is also much easier to buy than foreign currencies in tightly controlled economies like Cuba. A Cuban individual does not have to use local currency exchanges or banks to expose digital assets.
Even if it’s the hardest form of money ever, it’s certainly a bit early in the Bitcoin story, thinking that Cubans would rush out to buy it. However, the development, like the ones discussed above, is hardly noticeable worldwide and serves to illustrate the growing appeal of non-state-issued currencies.
What is Cuba’s currency system?
The two currencies circulating in the Cuban state economy, the peso and the convertible peso (CUC), are pegged in dollars.
Currencies are exchanged at different rates: 1 for state-owned enterprises, 24 pesos for 1 CUC for the public and others for joint ventures, wages in the island’s specially developed area, and transactions between farmers and hotels.
Cuba has legitimized the dollar and created the labyrinth system as part of a package of measures to open the economy after the collapse of the former Soviet benefactor while trying to inflict strikes on national citizens and industries.
While the system helped Cuba overcome the shock of the collapse of the Soviet Union, it eventually distorted the economy and concealed the real economic situation, productivity, and the competitiveness of state-owned companies and prioritize imports over exports.
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