RAYMOND, Maine — The United States’ embargo on Cuban trade has cost the island nation “$130 billion over six decades.” The embargo’s impact has worsened over time, but Cubans are finding ways to circumvent the United States’ embargo and rebuild the nation’s economy by developing cryptocurrencies.
The History of the United States Embargo
In 1962, President John Kennedy initiated an economic embargo on Cuban businesses trading or working with U.S.-backed and operated businesses. President Kennedy’s administration designed the embargo to punish the Castro administration for overthrowing the previous U.S.-allied Cuban government and express discontentment with the Castro administration’s apparent alignment with communist beliefs and powers. The embargo slashed Cuban-U.S. trade, increased taxes on U.S. imports and restricted travel.
During his time in office, President Barack Obama worked directly with the Cuban government to ease tensions and loosen the embargo’s restrictions. His administration permitted increased travel between the United States and Cuba and more U.S. involvement in trade with Cuba.
In 2017, President Donald Trump tightened the embargo by further restricting trade and travel, effectively undoing much of President Obama’s work. President Trump’s administration tightened the embargo to the point that the restrictions imposed looked very similar to when the embargo was first put in place by the Kennedy administration. The tightened embargo inspired creativity in Cubans to circumvent the economic impacts of the embargo.
The Embargo’s Impact on Cuban Business and the Economy
The precise percentage of Cubans living in poverty is not verified or available for public knowledge and accurate poverty figures have not been available for several years. In 2002, the number of individuals living in poverty in Havana, Cuba, increased by more than 200%. Poverty in the area stood at 20%, up from 6% two decades before.
In 2014, the restrictions eased. The following year, Cuban gross domestic product (GDP) had its highest jump in decades, more than $7 billion. With fewer limitations on Cuban businesses, foreign investments surged in Cuba. Investments in five golf resorts and many other deals were in progress in 2017, providing jobs to the country and increasing tourism’s contribution to the GDP.
In 2018, one year after Trump implemented a stricter embargo, the poverty rate was estimated by some Cuban economists to be between 40-51%. In 2018 and 2019, foreign investments did not grow or expand. Foreign investments have remained level, but the Cuban GDP has continually increased, however not as quickly as before 2017.
Between 2017 and 2020, the Cuban GDP increased annually by an average of $3 billion in U.S. currency. Before 2017, the GDP increased by an average of $6 billion in U.S. currency annually, starting in 2011.
How the Embargo Impacts Cuban Currency
As the value of the Cuban peso has dropped drastically, the embargo’s impact has worsened. The Cuban peso has significantly devalued in 2021. For more than a decade, the Cuban government had two pesos, one convertible for online purposes and a simple paper peso. The original two currencies were unequal in value, as one convertible online peso was equal to 24 paper pesos.
The Cuban government intended to eliminate the online peso as it provided no value to trade and did not economically support Cubans wishing to work internationally. As a result of eliminating the “e-peso,” the remaining peso is heavily devalued. One dollar, as of early September 2021, was equal to about 24 Cuban pesos.
The Cuban government did this because Cuba is dependent on imports for the necessities of daily life. The embargo has made it difficult for Cubans to trade in international markets as well. Utilizing only one peso, the remaining paper peso intended to improve Cuban self-sustainability in everyday life. The paper peso alone aimed to improve the economy and value of Cuban currency. Still, it has yet to improve in value, and predictions do not foresee an immediate improvement in the economy However, to improve the economy, Cubans introduced cryptocurrencies.
How Cubans Are Circumventing the Embargo with Cryptocurrency
In 2021, Cubans introduced cryptocurrency to the nation and the government has begun regulating cryptocurrency to circumvent the embargo, revitalize the economy and lessen the embargo’s impacts on Cuban poverty. Cryptocurrencies are forms of digital money, only tradeable online or with the use of technology, verified with a decentralized system rather than being monitored by one overarching central power. Cryptocurrencies are also impossible to counterfeit. Cuba introduced cryptocurrencies to the island to build its economy in currencies untouched by the embargo. The embargo has no control over e-money.
The remaining peso is unavailable for foreign trade due to the embargo’s impact on Cuba’s economy and cryptocurrency has grown in popularity since the peso devalued. No centralized bank controls cryptocurrencies and the U.S. embargo does not impact such institutions. Therefore, international trade and exports are possible with the use of cryptocurrency.
The Cuban government introduced a resolution that will regulate cryptocurrency use in Cuba. It states that cryptocurrency must be used “for reasons of socio-economic interest” and must not be involved in criminal activities of any sort. With the implementation of the resolution, Cubans will be able to circumvent the embargo with cryptocurrency legally and in a regulated manner.
Cryptocurrency usage in Cuba re-introduces the potential for foreign trade and easing the burden of paying for imports on which Cuba depends. Cryptocurrencies are excluded from the United States embargo, unlike its peso, and present opportunities to increase trade, re-value Cuban currencies and lessen Cuban poverty.
– Clara Mulvihill