The news that Cuba is drafting legislation to regulate cryptocurrency comes in the same week that Afghanis have been buying up Bitcoin in record numbers, as their country goes through the convulsion of the American withdrawal and a new Taliban government.
The crypto revolution is reaching into the most far-flung nations and bringing revolution.
It begs the question of how many people who are living under countries under sanction, or where the currency is failing, have already turned to crypto markets for financial survival?
Probably many more than we realise.
It’s already clear that, in more stable African economies like Ghana, Nigeria and South Africa, crypto trading is booming. Experts have assessed that Nigeria is the ‘top peer-to-peer bitcoin trading nation on the continent’, while the South African government has sensed an impending boom in crypto trading and has already deemed cryptocurrencies as a taxable asset.
According to the online QZ blog, “Daily crypto asset trading values in South Africa were “exceeding $145 million for the first time” in January 2021.”
But in African countries that are struggling, there is a distinct lack of transparency into the adoption of crypto. It stands to reason that in places where inflation is spiralling out of control, where the currency is losing value every day and where there are no solutions in sight, people look around desperately for somewhere stable to put their money. And for many tech-savvy people, that means working outside of the government structures, using mobile software and distributed assets such as Bitcoin and Ethereum.
To people in stable economies, that may seem risky as the prices of cryptocurrencies are famously volatile, but when you find yourself in a conflict zone or with a collapsing economy, then a cryptocurrency like BitCoin is actually the stable option.
This holds true in Venezuela where Reuters reports that cryptocurrency is emerging as a way to provide services handled elsewhere by the traditional banking system, and is probably the same in places as far apart as North Korea and Zimbabwe, or anywhere else where the traditional economy is barely functional.
Of course, it’s not only the citizens of these countries that understand the facts on the ground. Often the government does too. There are allegations that the North Korean regime is ‘rumored to be involved in cryptocurrencies as a way to accumulate assets that can circumvent sanctions and restrictions currently in place.’
As the world’s financial systems limp towards a digital, more integrated future, it’s inevitable that governments will step forward and try to regulate the emerging currencies that are a direct threat to their economic control over people’s lives.
The move by the Cuban government to regulate cryptocurrencies is a tacit acknowledgement that the people of Cuba have already made their decision on cryptocurrency. This widespread digital adoption took off because of how difficult it has become to get dollars in and out of Cuba in the wake of recent sanctions by the US government.
Last May, in Cuba ‘President Miguel Díaz-Canel said his government was analysing the appropriateness of using cryptocurrencies in the economic operations of the country, whose GDP plunged by 11 per cent in 2020 due to the tightening of the US embargo and the impact of the COVID-19 pandemic,’ according to EuroNews.
Bloomberg reports that the ‘central bank said Friday’ it is drafting legislation to regulate cryptocurrency in commercial transactions and to issue licenses for providers of services connected with virtual assets.
Latin America is ahead of the rest of the world in this regard, although it’s relatively new everywhere. But Paraguay, Mexico, and Panama have in the past expressed interest, while El Salvador has already taken the first regulatory steps.
What are the implications for a country like South Africa where so many citizens live outside of the traditional financial system? Will there be some kind of breakthrough utility that makes crypto the default for large, unbanked populations like ours?
What’s happening right now in Cuba is an interesting test case for any country thats seeks financial independence, and the results will reverberate far and wide.
By: Jeremy Daniel