Cuba to regulate cryptocurrencies soon, may allow financial institutions to deal in crypto

• The Cuban Central Bank is allowing financial institutions to perform monetary transactions in virtual assets.
• The Central Bank published a document laying down its upcoming regulations.
• The bank’s definition of virtual assets seems to cover all cryptocurrencies and future tokens that private firms may issue.

Cuba is looking to join a growing list of countries, which have regulated or recognised cryptocurrencies this year. The country’s central bank passed a resolution on Friday, which established rules for the use of virtual assets in commercial transactions within its borders. The bank said it could authorise the use of virtual assets in commercial transactions and license virtual asset service providers for exchange and payment activities.

The document says that “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 is defining virtual assets as “the digital representation of value that can be traded or transferred digitally and used for payments or investments''. This seems to cover all cryptocurrencies and also digital tokens that private firms may issue in future. However, the bank is also keeping government agencies from using virtual assets for transactions, except in cases that are authorised by the central bank.

Further, the central bank said that “persons assume the civil and criminal risks and liabilities derived from operating with virtual assets and service providers that operate outside the banking and financial system, even though transactions with virtual assets between these persons are not prohibited.”

The Bank noted that the use of cryptocurrencies can be risky and may lead to financial crimes. This is probably why the bank wants to bring these virtual assets within the regulatory purview.

Growing regulatory acceptance

The document published by Cuba comes months after El Salvador became the first country to officially recognise Bitcoin as legal tender. Salvador’s rules will come into effect on September 7 and have been followed by more Latin American countries looking into virtual assets. Other than Cuba, Paraguay and Mexico have also considered regulations, though both countries may face pushback as well.

A July report from investment bank JPMorgan noted that 90% of Bitcoins in existence haven’t been converted into fiat currencies in over a year. They are held in digital crypto wallets, which means that even El Salvador may have trouble using this as legal tender. Essentially, as a country, El Salvador has to exist within the world of fiat currencies, which means that the Bitcoins being circulated within El Salvador’s borders eventually need to be converted to fiat if the country is to benefit from them.

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