Money transfers from Cuban exiles are essential for many on the Caribbean island. But now the United States has stopped the flow of money. So new ideas are needed.
At the end of November, the US payment service provider Western Union processed, for the moment, the last money transfers between the United States and Cuba. Due to the new sanctions of the Trump administration against Cuba, the more than 400 branches of the company on the island had to close. A hard blow for Cubans residing in the United States who send remittances to their land of origin.
Until November, most of these transfers were handled through Western Union. So Cubans have to find new ways to support the sending of these vital foreign money transfers, one of the main sources of income for many families on the island.
The Cuban startup BitRemesas offers an alternative. Organize money transfers in the form of cryptocurrencies such as bitcoin, Ether, Doge, and others. “There is a growing community of supporters of crypto in Cuba,” says Erich García, a programmer and software developer from Havana.
This 34-year-old, who also manages his own YouTube channel with tips and solutions for using the Internet, launched the BitRemesas platform at the end of September.
Typically, to transfer money, customers go to Western Union or a bank, which charges them a commission and delivers the money to its destination. “The process is similar in our system, except that there is no bank involved,” explains García. “The money is sent to us digitally in the form of cryptocurrency and we take care of physically paying it to the client in Cuba.”
A win-win situation
The BitRemesas mechanism is very simple. García gives a practical example: “Someone from the US sends a relative through BitRemesas 100 dollars in bitcoins. We receive this 100 dollars in bitcoins and we organize an auction, let’s call it ‘negative’. There are many Cubans who want to buy cryptocurrencies . The smallest possible amount of bitcoins is auctioned. There are cases in which someone buys bitcoins for the equivalent of 88 or 92 or 93 US dollars. The difference in Bitcoin is, in this case, the profit of BitRemesas. “
The one who is willing to keep the least amount of bitcoins for the amount of Cuban convertible pesos (CUC) to which the remittance is equivalent wins. When the winner of the auction has transferred the total amount of the transfer, in this case 100 (CUC), to the recipient of the remittance, BitRemesas transfers the auctioned amount, in this case 88 or 92 or 93 dollars in bitcoins.
To understand all this, it is necessary to know that the CUC has depreciated strongly against the US dollar on the island, since the partial dollarization of Cuban retail trade. Although the official exchange rate remains 1: 1, on the black market they pay 1.50 CUC and more for one US dollar.
It is not possible to buy cryptocurrencies with CUC anywhere else. So people are satisfied with a smaller share. And, since 100 CUC is no longer 100 US dollars, but only around 66.67 dollars on the black market, they still do a good deal with the 88, 92 or 93 dollars in Bitcoin auctioned for 100 CUC.
BitRemesas currently has around 300 to 400 users. The trend is on the rise, says Garcia. In Cuba, there are an estimated 10,000 people in total who use cryptocurrencies. There are quite a few transfers, but often in small amounts of $ 10, 15, or 20, Garcia says. Since there are no fees, unlike Western Union or banks, people can also send small amounts: “Sometimes it’s $ 100, but the sums are rather small.”
Garcia’s platform collects a small margin on the respective cryptocurrency. And the person who buys the corresponding amount of cryptocurrencies receives a freely convertible alternative currency in exchange for the local CUC, internationally unusable. For García, “a win-win situation”.
Completely deregulated platform
“Cryptocurrencies give us certain freedoms that we normally do not have, since the use of financial instruments such as Visa, Mastercard, Paypal or other payment mechanisms is difficult for Cubans.” For García, this is the great advantage of cryptocurrencies in general and BitRemesas in particular. “It is a completely deregulated platform. There is no one who can block or sanction it, since cryptocurrency cannot be regulated and BitRemesas is based on cryptocurrencies.”
Not even the US Department of Justice has any legal recourse. The decades-long US blockade separates Cubans from financial markets and conventional international payment systems. Residents of the island do not receive credit or debit cards for international use. The United States sanctions against the Cuban financial institution Fincimex, which led to the closure of Western Union branches on the island, are just the latest in a long list of Washington measures against the Cuban financial sector.
“More and more Cubans use cryptocurrencies to buy or pay for services on the Internet,” says García. And he also has other ideas, such as paying the electricity bill, recharging the cell phone credit or similar, with the help of cryptocurrencies. “It is an alternative currency to which we have access in Cuba and which offers us new opportunities.”