Recently I wrote about the great potential for Bitcoin in Cuba. I concluded, however, due to lack of access to the internet the cryptocurrency is nearly non-existent.
HolaCuba.de, a German vacation booking company, is trying to change this. Users can now make payments for casas particulares, the Cuban versions of a “bed & breakfast,” with Bitcoin. Unfortunately, Bitcoin can only be used to cover the 20-30% down payment for the reservation – the rest must be paid using fiat currency (Cuban Convertible Pesos) directly to the casa hosts. I spoke with Richard Urban, a reservation agent with HolaCuba.de, and he told me, “We get very few reservations paid with Bitcoin;” however, there are “no technical issues, no complaints by either side.” To date, Bitcoin-paid reservations have come from Germany, Canada, Switzerland, Poland, and Russia. Most likely, HolaCuba.de converts the Bitcoin directly to a national fiat currency upon receipt, using the currency purely for transactional purposes. However, I didn’t receive a response to confirm or deny this.
Recently, the Cuban state telecom agency, ETECSA, approved the country’s first wireless hub located at a cultural center in Havana. The hub is operated by Cuban sculptor Kcho, who is using his own, government-approved connection to broadcast WiFi. This may be a small but potentially significant step toward greater internet availability on the island.
Cuba is a cash economy. Debit and credit cards are scarce. Historically, Cuban merchants have been barred from processing American cards until a recent policy change by the United States Treasury reversed this. US Dollar conversions to Cuban Convertible Pesos incur a 10% transactional tax by the Cuban government. The country is still heavily reliant on foreign remittances, around $2.6 billion in 2012, and another $2.5 billion of “in kind” remittances (products brought or sent directly to Cubans by relatives or friends). This remittance inflow is unlikely to change.
What is unique about the Cuban situation is the absence of a legacy banking system. Since most banks are seen by the people as corrupt and untrustworthy most transactions and savings are in cash (sometimes stuffed under a mattress). When Cuba becomes connected to the global internet, technology like Bitcoin will allow the country to “leap frog” over the current remittance services in favor of more egalitarian ways to send and receive money. For this to work, however, there would need to be a developed peer to peer network of people willing to transact between Bitcoin (or any cryptocurrency) and CUC on the island. This decentralized approach of having individuals create the remittance market would be superior to having a central entity process the transactions. This is because a central entity would be much more likely to capitulate to government regulation or corruption.
Image credit: Gabriel Rodríguez