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According to a Reuters report, Cuba’s Communist government has recently announced that it is contemplating the utilization of cryptocurrencies, which have been considered as a safe heaven by many rouge states, in order to accelerate the country’s economy amid a deepening crisis exacerbated by U.S. sanctions and the absence of Venezuela’s aid (which also seeks to employ crypto similarly).
Cryptocurrencies have recently picked up the pace as various leaders across the globe haven’t only promoted them but also started to actively incorporate them and thus make crypto much more prevalent. Considering the current significant global happenings such as the U.S.-China trade war, Brexit and a slowdown in various industries, these most crucial events can (and probably already are) turn the tables for many investors and individuals. Many have sighted cryptocurrencies as a safe vehicle to park their money, especially when the present outcomes of other financial avenues are uncertain.
Cuba is now also exploring the potential of cryptocurrencies to boost its inefficient state-run economy. Cuba is facing strict, decades-old U.S. sanctions as President Donald Trump has tightened the trade embargo. In addition to that, Cuba’s traditional all-weather ally Venezuela couldn’t make the scenario better with some aid as it is also facing major financial hurdles of its own. As a result, Cuba has finally decided to study the potential of cryptocurrencies and evaluate how these digital currencies can help lifting Cuba’s economic growth.
As announced on a roundtable on state-run TV by President Miguel Diaz-Canel and his government, a raise of the minimum wage and fierce market reforms will be the primary focus. The aim is to escape the impact of U.S. sanctions, which has targeted tourism and foreign investment in Cuba and to raise national production and demand in order to encourage economic growth. Diaz-Canel said the government was working on the details of the crypto implementation.
Economy Minister Alejandro Gil Fernandez stated:
“We are studying the potential use of cryptocurrency … in our national and international commercial transactions, and we are working on that together with academics.”
In the new package that will be introduced by the current government, the income raise will be seen in some pensions and wages for workers in the public administration, social services, and state-run media; this move could increase the medium monthly salary to $44.5 from around $25.
Part of a Necessary Plan, But Could Crypto Really Make an Impact?
According to Cuban economist Omar Everleny, the hike was necessary to encourage workers and to stop them from migrating. “For the first time, (the government) is linking the fact that everything can be achieved if workers are motivated,” he said.
Economy Minister Alejandro Gil Fernandez said that the government is also utilizing the power of decentralization to improve state-run company performance and stimulating local production which in return accelerate the exports. “The government was also studying how to allow the growing number of small private businesses to export through the state-run businesses,” he said.
It is unclear what kind of effect (if at all) cryptocurrency could have on a state-run economy controlled by authoritarian regime, which is antithetical to the decentralized nature of crypto.