In Cuba, the demand for hard currency like dollars or euros is increasing. Efforts to end the country’s dual currency system have raised fear of instability – and this has encouraged citizens to look for potentially less volatile vehicles in which to store their wealth. For example Bitcoin.
Rising demand has made it difficult for consumers to buy harder forms of money than the two national currencies. According to a Reuters report, Cuba currently uses the peso and the convertible peso (CUC).
The latter is expected to expire, which triggers fears of further currency devaluation and growing demand for potentially less volatile funds.
Hard money is becoming increasingly difficult to find
Roly, a 28-year-old smuggler who imports black market goods into the nation, claims that getting hard money from financial institutions has become essentially impossible in recent weeks:
“For weeks there has been no money in the banks or exchange offices, you have to look elsewhere … I spent half a day on the street under the sun and I couldn’t even buy a single dollar.”
Macro factors have limited the inflow of dollars into the country – such as tightening US President Donald Trump’s trade sanctions against Cuba and South American states’ termination of Cuban doctor contracts. The government has also introduced “dollar storage” to bring a little harder money into its own reserves and to protect itself from any volatility that the CUC’s task could bring.
However, according to the Cuban economist Omar Everleny, the CUC is already losing value:
“The CUC has already started to lose value. The economy is already being dollarized, even if nobody says so. “
Historically, hard money forms have triumphed over the more volatile forms. When people have a choice, they almost always prefer money that is less likely to suddenly lose value thanks to the interference of those who spend it or control its monetary policy.
Bitcoin is better
With its strictly limited supply and regulated spending, Bitcoin is the hardest form of money that mankind has ever known. With Cubans struggling to find dollars or euros to hedge against their own depreciating national currency, Bitcoin could become more attractive to citizens.
Bitcoin is not only limitless and therefore a harder form of money than dollars or euros – it is also much easier to buy than foreign fiat currencies in strictly controlled economies such as Cuba. Cubans do not have to use the local currency exchange or bank to deal with the digital asset.