Cuba’s Bitcoin Revolution – Bitcoin Magazine: Bitcoin News, Articles, Charts, and Guides

Lucia is a 30-year-old medical worker and Bitcoin user living in Matanzas, a city of about 150,000 people sitting about 50 miles east of Havana on Cuba’s northern coast. Named after an aboriginal rebellion against Spanish colonizers, the word “matanzas” literally translates to “slaughter.” The settlement later turned into a 19th-century epicenter of slavery and sugar plantations. Today, like all Cuban cities, it is ground zero for a financial and human crisis.

The Cuban people are suffering their worst economic struggle since the early 1990s, when the Soviet Union collapsed and the regime lost its main lifeline. At the time, longtime dictator Fidel Castro told citizens they needed to unite together to get through a “Special Period.” The era was marked by food shortages, blackouts, thousands fleeing to Florida on risky rafts and a spectacular devaluation of the Soviet ruble-pegged peso. Between 1991 and 1994 the Cuban economy contracted by 35% and quality of life deteriorated dramatically.

Tensions peaked in the summer of 1994, when an anti-government protest known as the Maleconazo uprising broke out in Havana. Without its Soviet subsidy, the state ration system was failing to support the population, and important goods were all of a sudden only available for purchase with dollars, which were increasingly expensive for Cubans to obtain with their peso wages and pensions. In a desperate move, the regime violated its founding collectivist philosophy and imposed a series of unprecedented taxes on the population. In response, tens of thousands of protestors gathered at the Malecon waterfront, calling for an end to the government.

The internet did not exist, so the regime was able to quell the movement through police brutality while ensuring that most Cubans barely knew anything had happened. State television and radio made a brief mention of a small gathering of delinquents and troublemakers. But in reality, the Maleconazo was a staggering display of dissent, the biggest on the island since the revolution.

When the money system breaks, it can threaten a regime’s survival.

I. Monetary Purification

Today, Lucia and other Cubans talk of a new Special Period. As a result of currency reform and social frustration from decades of repression and bureaucracy, there are again shortages, blackouts, extreme inflation and protests.

The big difference is that today, with widespread mobile phones and internet access, everyone knows what’s going on. Last month, on July 11, the biggest anti-government protest since the 1959 revolution broke out, not just in Havana but in cities all across Cuba.

With a firsthand view into the medical system, Lucia told me that the human support network in Cuba is collapsing. The pandemic has overwhelmed hospitals in Matanzas, she said, and dead bodies pile up on the streets. It is incredibly hot and Cubans go many hours a day without electricity. Food — especially beef, fish, chicken and eggs — is scarce or even impossible to find. New American regulations, passed by President Trump right before he left office, have cut Cubans off financially from their families in the U.S.

“It’s hard to get food, it’s hard to get medicine, it’s hard to get bathroom supplies, the power grid is broken, the pandemic is peaking, tons of elderly people are passing away, the healthcare system is collapsing, we have no oxygen or fans,” Lucia said. “This was too much. This is what put people out on the streets.”

Lucia told me that at the very root of the state’s failures and the unprecedented citizen uprising is a crisis of money.

In January the Communist Party of Cuba conducted what it described as a “monetary purification.” Since 1994, the government issued two kinds of currencies: the CUP, or Cuban peso — pegged to the dollar at 24:1 — and the CUC, or Cuban convertible peso — pegged to the dollar at 1:1.

Public sector salaries and pensions were always paid out in pesos, but for years, citizens needed to obtain CUCs to buy key items like medicine, any food beyond the basics, clothing, cleaning supplies and electronics. The regime designed the system to suck value out of the population, selling CUCs for 25 pesos at state-run money exchanges called cadecas while only buying them back for 24 pesos. The regime knew it would have to keep printing and inflating pesos for the staffing of its centrally-planned economy, even as its agricultural and industrial sectors collapsed. The dual-currency system gave it life support, propping up purchasing power for the elite and well-connected.

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