On The Brink with Castle Island - Boaz Sobrado on Bitcoin adoption trends in Cuba (EP.173)

Episode Date: February 1, 2021

Boaz Sobrado, data analyst and the founder of whynotcuba.com  joins the show to talk about trends in Cuban Bitcoin adoption. In this episode:  How Boaz came to start an ecommerce company in Cuba and how Bitcoin became relevant to him The structure of Bitcoin trading markets in Cuba How Bitcoin currently trades in Cuba Drivers of Bitcoin adoption in Cuba Why Cuba until recently hasn't been known as an important jurisdiction for Bitcoin Why Cuba doesn't show up in the typical proxies for bitcoin usage Why internet penetration in Cuba is accelerating Bitcoin adoption How Bitcoin is incorporated into the remittance flow in Cuba How the Cuban regime thinks about and talks about Bitcoin The history of Cuba's three simultaneous sovereign currencies How the sovereign currency transitions are a means for the government to acquire hard currency at the expense of savers The key factors supporting a wave of Bitcoin adoption in Cuba today How Bitcoin markets permit the pricing of the black market peso rate Content mentioned in this episode:  Boaz Sobrado, A Day Using Money in Cuba Boaz Sobrado in Decrypt, Why Cuba is Primed for Bitcoin Adoption  

Hello and welcome back to On the Brink with Castle Island Ventures. Today we're talking about Bitcoin adoption in a hitherto underappreciated jurisdiction. I'm referring to Cuba. Now, I think it's possible Cuba has been overlooked as a venue for Bitcoin adoption due to its absence on P-to-P trading platforms like local bitcoins, which is typically how people try and ascertain the geographic distribution of Bitcoin adoption. But as it turns out, there is a groundswell of usage for Bitcoin in Cuba. Today on the show, we invite Boas Sobrado to come and talk about it.

He is a data analyst by day. He's also the founder of Why NotCuba.com. He's written some excellent articles on Bitcoin adoption in Cuba and why he thinks it's primed to accelerate. There's a few interesting trends which are causing Bitcoin usage in the country to increase dramatically. also in this episode we talk about Cuba's multiple currency systems and how the government uses this deprecation and creation of new currencies as a way to acquire hard assets at the expense of their savers.

Hopefully, after listening to this episode, we will have an appreciation for a new venue where Bitcoin is really moving the needle for these people. Let's dive right into it. Brought down by bad mortgage investments, Lehman, which has 25,000 employees will be liquidated. The federal government loans have mentioned. American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep.

The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called the Bitcoin. Bitcoin. Blas, hello.

Thank you for joining us. This is very exciting. We're going to talk about a new crypto jurisdiction today. The Bitcoiners don't talk about a lot. So, yeah, welcome to the show. Hello, Nick. Thanks. So you're currently in Costa Rica, I gather, but we're actually going to talk about Cuba,

which is a country you have an interesting relationship with. So maybe just to start, tell us about how you, because you're not Cuban, but you've spent a lot of time there and really deeply. understand the sort of crypto economy there. So tell us about your history with Cuba. Okay. So for a brief history of my times in Cuba, basically after university, I went to work for a venture building company called Rocket Internet. And they're a German company, but I was sent to work in Burma, which was a country that had recently opened up, was growing at 10% a year. It was incredible growth in pretty much everything. And I found it very interesting.

I found a lot of very interesting opportunities there, but I didn't speak Burmese. So later on that year, I was thinking, okay, like what country is there that is opening up, that has huge growth opportunities in the future and where I speak the language? And because I speak Spanish, I thought, okay, like the best place for me to go is Cuba. So I hopped on a plane and I went to Havana and I basically traveled around Cuba and got to meet people and try to look at business opportunities there. And I quickly realized that there was no way or very difficult for you to make money from actual Cubans, mostly because they don't have any money. But the tourism industry was doing very well. So this was 2016. This was the year Obama went to Cuba and things were opening up.

So I decided that I would try to set up some sort of e-commerce venture that would help Cubans sell online because for many reasons that I think will probably go into, it's very hard for. for Cubans to do business online. And I thought that if I have a European legal entity and, you know, infrastructure outside of the country, with my e-commerce knowledge, I'll be able to sell business that can help them sell online. Even though we were a European company, even though Europe has no sanctions against Cuba, it's perfectly legal to do business with Cuba as far as European laws go.

It's because of the American sanctions, financial institutions are very wary about providing financial services to companies that have anything to do with Cuba. And if you're booking.com or if you're Airbnb or one of the big companies that do business in Cuba, you have lawyers, you have a lot of volume. It's very easy for you to sit down with someone and explain to them that, you know, what I'm doing is not illegal and they'll, you know, run analysis of the risks and the benefits and they'll say, okay, let's just do that. if you're a small company, then it's simply not worth it for them. It's just a headache for them. If they see Cuba anywhere, they'll run. So at the very beginning, we had trouble with getting access to financial services. This is something that happens a lot in crypto as well. And at one point, we got shut down from payment processing and we lost banking as well, etc., etc. And I was, I had to send every week money to Cuba to pay for the services.

which our customers had booked, which could be accommodation, could be transportation, etc. And we're paying quite a lot of money around 3% with someone literally taking money out of a cash machine, actually more like 5% with someone literally taking money out of a cash machine every week with a credit card or a debit card. And there were limits on it as well. And we saw an ad for Bitcoin and I thought, okay, this might be interesting. this was an ad in the local version of Craigslist.

And I said, okay, this might be interesting. And that's how I ended up in the whole Cuban crypto situation. And this was back in 2018, I think, that we started. It was a very small market then. I mean, it was a handful of people that were buying and selling crypto then. And we quickly became one of the biggest players in that small market because we had constant cash flow needs and we had to, sell Bitcoin basically every week.

Got it. So there weren't any formal Bitcoin exchanges in Cuba. And I suppose there probably still aren't. But all of this activity you're talking about is P to P, right? Yeah. So it's mostly P to P activity. Yeah. There was an initiative back in 2018, I think.

Sorry, no, this was 2018, 19, yeah, where they tried to launch the first Cuban crypto exchange. And there was a centralized Cuban crypto exchange, which was operating. And they seek clarity from, it was ran out of Brazil by a few Cuban students that had gone to study in Brazil. And they seek clarity from the government there in Cuba asking, okay, we've set this up now. Is it okay, if we continue, they received no clarity. And they decided the regulatory risk was too big. they didn't want any of their employees being arrested with large sums of other people's money.

Right now, there's a few websites, which are run by locals. But it's mostly informal B2P network, telegram groups. Yeah, that's the way it works. The websites like local Bitcoins and Paxel, they don't operate in Cuba. So it's unlikely of an Israeli story where local Bitcoins was the big platform. So I guess, you know, it's kind of three levels of formalization of Bitcoin markets. You've got centralized exchanges. Then you have the P-to-P exchanges where the matching happens on specific websites.

And then in the most decentralized manner possible, you have Cuba where it's chat rooms, effectively, where deals are brokered. Yeah. Yeah. So, I mean, right now, I'm not entirely massively in the loop as to how it works right now, because obviously tourism hasn't been doing very well, so we're not really sending money to Cuba anymore. But the way it worked, the way we got into this is we saw an ad on, and we posted ads on the Cuban version of Craigslist, where we said, hey, we're looking to sell Bitcoin, and then someone emailed us,

and we met up in the park and discussed terms. So you wrote a really interesting article in Decrypt recently entitled why Cuba is prime for Bitcoin adoption. And I thought this is interesting because Cuba is almost never a jurisdiction that gets mentioned when we talk about places where Bitcoin is really relevant. But I guess your claim here is that it's actually a place which is very suitable for Bitcoin. Yeah, yeah. I think the reason why Cuba has not been mentioned a lot in terms of Bitcoin is because up until very recently, there was pretty much no internet or the internet was very limited. It was very bad. It was very expensive.

Internet was pretty much inaccessible for the biggest percentage of the population. So using Bitcoin seemed like something very foreign and science fiction there if people don't even use Facebook. That being said, in the last two or three years, Cuba has become the country with the fastest growth in internet penetration. I don't remember the exact numbers, but it's gone from basically zero to, I'd say, like more than half of the population regularly gets online these days. And it's become a lot more affordable for the locals, even if it's still relatively expensive in international terms. you see people online all the time these days when you go to Cuba, which wasn't the case five years ago. So I think this is the reason why sort of people haven't mentioned Cuba

as a Bitcoin jurisdiction or Bitcoin location because up until recently, frankly, it wasn't possible. But that has changed a lot recently. So I think that's put Cuba on the Bitcoin map. And I guess the other thing is people often look at the local Bitcoin's data to kind of triangulate places in sort of the developing world where Bitcoin adoption is occurring. But we don't even have that for Cuba because there's not a lot of data being collected about these trades. Yeah, it's very hard for me.

I wanted to gather some data to support that decrypt article. But it's very hard to find data on how much volume there is. I know how much volume I did back in those years, and that was a not inconsiderables amount. But based on the activity that I see in these telegram groups these days, it's gone from, I mean, I see orders for like 12 Bitcoin, which wasn't the case two years ago where people were trying to buy 12 Bitcoin or sell, but 12 Bitcoin in one go. So the volumes have definitely shot up a lot as far as I can tell. It's hard to put a number on it. And if you look at more simple indicators like Google Trends, Google Trends was an all-time high in Cuba way before Bitcoin hit the all-time high.

So I wrote the DeCrypt article back in, I think, November, sorry, early December. And even then, Bitcoin was reaching highs that had never been seen before in Cuba. And I think there's quite a few reasons for why Cuba is an important Bitcoin location these days. First of all, it has to do with the internet, as I mentioned, but also because it's a jurisdiction where there's a high level of financial censorship. So obviously the value of the censorship-resistant currency goes up a lot in jurisdictions like this. And there's two sources of financial censorship. So on one hand, you have the internal one, you have the government, which will tell you how much you're allowed to sell a kind of Cuban Coca-Cola for. And if you sell it above that price, then you can get a fine.

And there's also the sort of external government, the external financial censorship, which has to do with the U.S. sanctions. So if you're a Cuban entrepreneur, you cannot buy anything on Amazon, you cannot buy anything on Alipay. You don't have access to visa or MasterCard. You can't even pay for hosting on your website with your credit card or debit cards. So there's so many things you can't do online. Anything that, you know, for you and me is a completely normal thing, like a Spotify account or a Netflix account, whatever, you just cannot do from Cuba because you don't have access to the global financial system. And of course, now that people are online, they want to do this. So Bitcoin offers them an opportunity to do that. So that's one level of

things. The other level is like Cuba is, the last two years for Cuba have been some of the most difficult, most challenging years economically since basically the early 90s. And this has led to very high levels of inflation. The prices of food have doubled or tripled at times. And people are looking for something where they can put their money in, where it's not in Cuban dollars. And we can go into the mess that Cuban monetary policy is in a bit. But basically, they're looking for something to store value in. And the traditional solution for this is to get US dollars, right? That's what many of these countries do when their own currency hyperinflates. Everyone turns to the US dollar. Well, now that COVID is around, the traditional route of getting US dollars through tourism

has been shut off, right? So all of a sudden, you have this demand to put your money in the store of value, and you don't have the usual store of value, which were US dollars. And moreover, the current outgoing US administration has been extremely strict on the sanctions that have ramped up the sanctions program quite a lot. So companies like Western Union are no longer sending money to Cuba. And this was a multi-billion dollar flows that went from the US to Cuba every year. So now you've got a lot of people who are looking for a way to send value from the US to Cuba. So yeah, these are the factors, I think, that have put Cuba on the map. And when you think about that remittance flow, is that denominated in Bitcoin, if Bitcoin is the bridge currency or is Bitcoin merely the kind of the pass-through asset there?

And it's really a way to transport dollars effectively. It's interesting, right? Because it's, so for people sending remittances, it's the path to pass-through asset, right? So people send, they want local currency that they can spend in the market. and they can buy food with and they can pay the bills with, et cetera, et cetera. So it's mostly denominated in US dollars. That being said, every trade has two sides to it, right? So there's someone in the US sending Bitcoin to Cuba so that their family members can sell it for cash.

But then there's someone taking their cash and buying their Bitcoin. And that means that, you know, they want something to do with that Bitcoin. And there's different things that they can do with it. They can choose to store their value in it and speculate with it. And, you know, that obviously is a popular use case there as well as everywhere. But very often it gets used for importing, for buying things on AliPay, on Amazon, etc., etc. So, I mean, to answer your question, as of right now, mostly people use it as a bridge currency, but that doesn't mean that people

aren't looking to buy Bitcoin as well and to use it for what it is. Totally. And so I guess anecdotally, you're saying volumes have increased, but again, it's kind of hard to present sort of hard evidence on this, I suppose. It's extremely hard to present hard evidence on this. And it's not just that I think the volumes have gone up based on what I can see in activity in telegram groups. But there's also been this ecosystem of companies that have been building around Bitcoin. And these are local companies built by local developers that I'm in contact with. So there's a company called Bitremes, which basically stands for bit remittances,

where you can do all sorts of things with Bitcoin. and it's run by a popular Cuba YouTuber YouTuber. You can use Bitcoin to pay your Cuban utility bills. You can use Bitcoin to send remittances in a very simple way to your family. You don't have to know much about how Bitcoin works. You can just send Bitcoin here from Coinbase and we'll make sure your family gets the money. I've tried it. It works.

And there's another couple of companies that have basically incorporated Bitcoin and into their modus work into the way that they operate. There's also another one that was very interesting. I don't think it's live anymore. It was a few years too early. But there was another website that I think something similar will kick off soon, which was where you can hire freelancers for Bitcoin. And I think a few transportation sites have also started to use Bitcoin to, you know,

make it an option for their clients to pay for, transportation using Bitcoin. So what's your understanding of the current Cuban government policy towards Bitcoin? I know you mentioned that exchange that closed down preemptively, but how does the Cuban regime think about the asset? Well, it's very interesting because the Cuban regime has, so there's two sides to this story. I keep an eye on the official Cuban media, and they've written several times, about Bitcoin. And much of their takes are, you know, on one hand, this could be a very valuable

instrument because it could help us avoid the evil and just American sanctions. On the other hand, it's too volatile for us to be useful. There's a lot of people in Cuba who are gambling with it. It could be used for illegal exploitation of capital, as they call it. And I think the, the, the, last big story I read about Bitcoin had to do with this huge Ponzi scheme that was happening where I think it was called Trust Invest, something like this. And basically a lot of Cubans were buying Bitcoin so they could participate in this Ponzi scheme. And obviously, authorities at some point realized this. And this was published in the local media saying, okay, Bitcoin can be a useful tool, but a lot of people are using it to do.

bad things and you should be very careful when you when you buy bitcoin it's actually not not that different from the sorts of guidance you'd get from from the fca or other um governmental agencies yeah i guess there's like some irony maybe in uh you know ostensibly a socialist regime embracing a free market monetary asset uh in order to get around you know u s financial repression. Well, well, the regime is very far from from embracing it, I would say, but they're not exactly a regime that's very good with technology. That being said, it's very obviously not been shut down, right? So people have looked at it and no one has said, okay, we need to arrest people that deal in Bitcoin, right? Because it wouldn't be that hard to find one of the bigger sellers on

on these peer-to-peer exchanges and arrest them. And in fact, it did happen with the US dollar traders. They did get into trouble and there were some high-profile cases brought up against people that were selling dollars in the black market. The same hasn't happened with crypto. And again, it's probably a smaller volume than the illegal US dollar market. I'm not sure. But if they wanted to send a message, they could have sent a message by now and the message

hasn't been sent. And is transacting with and owning US dollars currently legal in Cuba? I think that's a tough question. I think it is not illegal to hold US dollars now. Actually, sorry, let me be phrased. It's definitely not illegal to hold the US dollars now. And in fact, the government wants you to hold as many US dollars as you can because they want to take them from you. They've set up companies that local companies, local stores, local retail outlets where basically they only accept US dollars and other hard currency precisely so that they get access to hard currency because they used to take quite a lot from tourism and now they don't have access to that. So they need hard currency so they want to take it from the population. So it's not illegal for the

population to hold it. What is illegal is buying and selling on the black market. You're supposed to buy your dollars and sell your dollars through the only Cuban company that's allowed to do this, the Kareka, which is a Cuban state-owned company. But in practical terms, it's actually impossible to buy dollars from them. You can sell your dollars there, though. So when you talk about a growing affinity for crypto in Cuba, Bitcoin is a bridge asset. and clearly enthusiasm for dollars, have you noticed any uptick of stablecoins or has the sole cryptocurrency that people are interested in, does that remain Bitcoin?

This is a very interesting question. So if I go on to Bitremesas, which is the Cuban site that accepts Bitcoin, they currently accept multiple cryptocurrencies and stablecoins. So they take RTM, they take Bitcoin, they take Bitcoin Lightning Network, which is, which is incredible because there's many more established companies that don't. They take light coin ether, Bitcoin Cash, Monero, Dash, three versions of used tether, Dodge, Tron, BNB, and the trust wallet token and pay year, which I have not heard of. So, I mean, to answer your question, the biggest market, the most liquid market is for Bitcoin.

But I have seen people that have started turning towards stable coins like Tether, like USC. But then again, the worry there is the same worry that they have with PayPal, right? So there's a lot of Cubans that use an email address to open the PayPal account and they use a VPN, et cetera, et cetera. But as soon as PayPal says to them, okay, can you please show us your ID? Then, you know, you've lost your money. So there's always a confiscation risk.

I think that's the reason why most of these big transactions get done in Bitcoin or maybe try to be obfuscated in ways that people can't tell it's coming from Cuba. So last year you had this really great article about the multiple currencies in use in Cuba. And you call it a day using money in Cuba's really, really fascinating account. I learned a lot about it, but I'll admit that I couldn't keep track of which currencies were which. So I think in our prior conversation, you told me at one point there were three different kind of sovereign currencies being used in Cuba. Is that correct?

At one time? Yeah. Yeah. Yeah. I mean, subject to interpretation, but yeah, it's a complicated story. And it goes back to the 1990s. So what happened then was, you know, Cuba had the Cuban peso, which was, you know, the same Cuban peso that they've had since, you know, the times of the Spanish colony, etc., which, you know, at some point was pegged to gold or to the US dollar, etc. Until 1958, when the Cuban Revolution happened, and at some point they pegged it to the Russian ruble, sorry, the Soviet rubble, as it was called then.

But then in the 1990s, when the Soviet Union imploded, Cuba all of a sudden lost a lot of the subsidies that they'd received for being a socialist country from the Soviet Union. So the value of the Cuban Peso basically went down. There was a period of hyperinflation. It was an extremely difficult time economically for Cuba. It's euphemistically known as a special period. People literally went hungry. There were paracots. time. It was a very, very difficult time. And basically, the country started to dollarize. So,

so the PACEO became worthless and everyone was trying to get dollars of tourists, etc., etc. And the government, what they did is they started encouraging a bit more private enterprise in the 90s. And at some point, they decided to make their own stable coin, a little bit of a stable coin, which was one-to-one backed with US dollars, which was known as a Cuban convertible peso. So the Cuban convertible peso, basically, the promise was that it's backed one-to-one by US dollars in the Cuban Central Bank,

and they incorporated it in the economy, they legalized owning dollars, you could deposit dollars, etc. US dollars, sorry, not Cuban convertible pesos. And eventually, over the course of effect, few years, they sort of like did a switch where they convinced the population that had, you know, there was, had quite a lot of dollars because the economy had dollarized. They convinced the population to basically exchange their US dollars for Cuban convertible pesos. And when I say

convinced, it was, you know, partly convincing and partly, you know, all sorts of rules and decrees and regulations that made it extremely a lot more harder to transact with dollars, but it made it a lot more easy to transact with Cuban pesos. And the whole Cuban peso became the sort of, there was a sort of parallel economy where if you as a tourist would go somewhere, you would go to the cinema, for example, or to the theater, you'd get charged 20 Cuban convertible pesos, but the locals would get charged 20 Cuban pesos, and that was a 25 times difference, basically. And that happened.

So we had like this economy where basically there was two currencies circulating. And eventually, I mean, they both became indistinguishable from each other in the sense that you could use the same two different currencies in the same transaction. Right. So so you could go to a store pay with one Cuban convertible peso and I don't know, 20 Cuban pesos. And that would be what you pay. So it was two different currencies and same. country but effectively being used by the population and by foreigners etc and this was the case up until 2019 and in 2019 they introduced something called the mlc the monnella liurament de corbettile which basically stands

for a freely exchangeable currency which which you could buy using hard currency only and the way that you could buy this melc was So what you could use it for is you could use it to buy imported things in certain shops, etc. Where you could only buy for this foreign hard currency. But again, you needed to give the government your hard currency so that you could transact in these stores. And this year, as of the 1st of January, officially they withdrew the convertible Cuban Peso from circulation. and you can, and by the end, within by June, I think there'll be no more convertible Cuban

Pesos circulating. It will only be Cuban Pesos, and of course, the MLC stores are still open. So effectively, like, I know it's very complicated, and these have all very different names, and it sounds very complicated, but basically what happens is every 20 years or so or more, the government needs hard currency, population has hard currency, they invent something so that they can get the hard currency from the population, and eventually they keep it. That's basically what the story is about.

So hang on, this is very complicated. The Cuban convertible peso, which was like a dollar stable coin, right? What was the, was, so did that ever trade below its peg, or what was the relationship to the peg there? That's very interesting. So up until mid-2019, it traded like unofficially as well, around 3% up above or below its peg, basically. And then in 2019, when they announced this MLC, the peg broke. And informally, it started trading at highly discounted rates. and right now, or up until recently, and again, I'm not sure I'm 100% right because I've not been to Cuba for a while.

I was supposed to be there right now, but flights got canceled due to COVID. As of right now, I think it trades that around 50% of the value in dollars. So it's basically the peg broke, and now the MLC is a new Cuban stable coin, which everyone wants and nobody wants the CUC, which is the Cuban convertible peso. And is the CUC redeemable for the dollars held on deposit with the central bank? Well, in theory or in practice? Either.

In theory, CUCs are one-to-one back to the dollars, so you can go to like the local Kedeka and you can sell them back the CUCs and they will give you its dollars. in theory, that's how much it's worth. In practice, you'll have a lot of difficulties doing that. So you could try. And maybe if you're politically corrected, connected, you might be able to redeem some or maybe you can get some special allowance from some sort of company that says,

okay, you need to go abroad on some serious business, company business, state business. So please exchange this currency for. our employee, but in practice, if you're someone that's not well-connected and you want to buy a substantial amount of dollars for CUC, you'll find it very hard to do so. And what would you, what's the purpose of rotating out these like state stable coins periodically? So moving from the CUC to the MLC is the other one called? So you've got the Cuban Peso, the Cuban convertible Peso, and the MLC. I'll answer this. question for you and I hope I am not going to introduce a lot of complexities.

So foreigners mostly interact with the, so foreigners often think that the Cuban convertible peso is a sort of like invention for tourism because obviously as tourists, that's what they interacted with most, but actually it's a lot more complex than that. And a very interesting point that the Cuban economist called Péryoron-Wen-Ré. talks about very often with regards to monetary unification is that the accounting of Cuban state-owned companies has a very erratic, very different exchange rate for Cuban pesos to Cuban convertible pesos. And I mean, let me let me find out a few examples for. you because it's it's it's it's it's it's it's ridiculous how how different these different companies can can

exchange Cuban pesos for Cuban convertible pesos um but basically the the what happens is um that one company exchange it one to one for the Cuban peso and the other company for two to one and the population of 24 to one so it's because it's such a mess it basically has been a way for these Cuban state-owned companies to obfuscate the amount of money that they're losing and how unsustainable they are, basically. So the reason why you want to sort of unify the two currencies,

the Cuban Peson and the Cuban convertible Peso is because you want to get rid of this mess and you want to sort of simplify the economy and cut basically all the fat of the unsustainable companies. The problem is that if you're the government, you still want to get hard currency from the population, which will receive it in one way or another. So what you do is, what they've chosen to do is they set up a retail network

that basically operates with MLC, which is a new sort of stable coin. And the difference between the MLC and the Cuban convertible peso is that the MLC is not actually a currency, It's more like you top up a gift card, basically, and it has no physical bills, et cetera. You top up your MLC account and then you can go to a retail store where you can buy, I don't know, food or a car or an air conditioning system, et cetera, et cetera. That in that way the Cuban government can get hard currency. I've got a few examples here. So like, ask Cuba, the Cuban state-run sugar company, they exchange. CUC and CUP at one to two rates, but only for fuel purchases.

Ascuba uses a 1 to 3 rate for other non-fuel purposes. The Ministry of Finance and Prices specified that the sale of food to the tourism industry is at the rate of 1C to 9CC. In the special economic zone of Muriel, the salaries are paid with the exchange of 1C to 10 CPU and other foreign investment companies must pay salaries at the exchange rate of 1C to 2Cup. So basically, to answer your question in a short way, it's a complete mess, and they're trying to solve it by simplifying a bit, but they need to find a way of still getting hard currency from the population. And so the purpose of MLC, would you say that is to continue this expropriation or I guess just acquisition rather of hard currency? or is there really the objective is to digitize the dollars that the local population holds

and give them an instrument that they can use to transact with those dollars in a more convenient context. Is there anything to be said for that latter explanation? No, so actually that's how it was with the CUC. So the CUC was a currency that was in theory to one back to the dollar and I could transfer you CUC from my CBCB. bank account, your Cuban bank account, and it was basically, you know, a medium of exchange, it was a real currency. The MLC is not that. So you cannot, people cannot transfer MLC to each other. There's no MLC banknotes. It's basically only a currency that you can spend in, in the MLC stores, basically. So it has a lot, it's a lot more to do with acquiring hard currency from the

population and not so much with giving the population something else to transact with. Got it. And then in terms of the Cuban peso, what has been the inflation track record with that currency over the last couple decades? So in theory, and up until mid-2019, the Cuban peso traded pretty much 24, 25 to 1 to the US dollar. The official exchange rate, as of today, right now January 2021 is 24 to 1 to the US dollar. In practice, in the black markets, it's trading 60 to 1 approximately, as far as I know. Yeah. One interesting thing that I like about the local Bitcoin's markets in Venezuela is you can actually use that to derive an implied black market exchange rate of the Bolivar to the dollar.

This is actually the case in Cuba as well. So the premium you get over the spot price very much has to do with the implied black market rate. I love it when Bitcoin is this tool to create interesting informational signals. So we're talking about two, maybe three currencies. How do people do that mental accounting? I mean, one is enough for me. How do you handle three? it's it it it it's terrible um at some point you get used to it but um it's terrible it's it really

confused foreigners tourists when they were visiting um even confused as cubans to be honest with you like it it has happened to me before that i you know someone tried to to scam by giving me the change back wrong in the shop and like I could tell they'd done the math wrong because they'd actually given me substantially more but I could tell that they wanted to scam me so like the intent was the opposite that it's terrible I mean it's really hard there's a lot of or it was really hard better said because the CUC is gone now there's a lot of like arbitrary solutions that existed like the exchange rate for coins was different than the exchange rate for notes.

So like 50 CUC cents were 10 pesos by custom, whereas one CUC note was 24 pesos by custom. So basically it was very complicated. It was terrible. Nobody wanted it that way and existed this way for more than a decade. So in a way, it's in a way, it's actually quite good that the government has gotten rate of the CUC. That being said, now the MLC is what for many people the CUC was, which is a way to access better quality products through the government. So, I mean, clearly this is a monetary system which is dysfunctional in a number of ways.

And then you also have price controls and, you know, all the issues that come with, you know, just general kind of socialist states. To what extent. would you say Bitcoin alleviates any of this? I mean, clearly Bitcoin is still pretty niche, but what is the relevance of Bitcoin in Cuban society? And, you know, is that growing? I have, I mean, it's hard to give you hard data because of the way of the market is structured, but I have a strong suspicion that the many, many remittance sort of systems, that have propped up following the ban of Western Union, that you go online on Cuban Craigslist and you say, I want US dollars or I want to send my family member money,

what do I do, et cetera, et cetera. I have a suspicion that a substantial percentage of that is run one way or another through Bitcoin. I think it's being used to transport value in and out of the country in an important way, in a non-negligible volume. I don't really have the sort of, you know, volume data to prove it. But I do see that the volumes have gone up substantially.

And it's become clearly a method of sending value to the island. It's frankly, the first thing I think about when I think about paying someone in Cuba is doing it through crypto. And in fact, if you see these Cuban entrepreneur influencers on Twitter and on YouTube, they do these threads about, okay, you can make money online too. Almost always the how do I get paid is through crypto. And these are not people who are like Bitcoiners who are like really into cryptocurrencies and I want to spur adoption, et cetera, et cetera.

These are people who want to get stuff done, right? And these are people who want to use it as a tool, not necessarily for ideological reasons. Yeah. What is the, what, so you kind of touched on this, but what would you say the name recognition is of Bitcoin in Cuba? I mean, I guess it depends demographically, right? Yeah, it's a very, very strong demographic component. within the Cuban tech scene, which is not huge, I'll give you that, but there's quite a lot of people who are online entrepreneurs in Cuba,

and it's a very important opportunity for many people to make some money that's more than the official $30 a month salaries. Within the Cuban tech community, pretty much everyone is a Bitcoin or a crypto proponent. within the wider economy, I don't know how to tell you about the brand recognition. I'm sure that the older demographics wouldn't know what it is, but I wouldn't be surprised that more and more young people are talking about Bitcoin and talking about crypto in general. So your answer to this question might be nothing, but what would you say non-Cuban bitcoiners can do to basically help Cubans learn?

and learn about and use Bitcoin, if anything. Well, there's a lot of very good quality Spanish material online that people are using. That's extremely useful. I think probably the best thing that you can do is at some point go to Cuba and spend your bitcoins there. Use these Bitcoin companies that use Bitcoin to, move value in and out of the country and around the country, just simply contribute to the local economy with your coins.

As of right now, it's really hard to do. Or maybe consider hiring people in Cuba and paying them in Bitcoin. Now that you know that you can access a very well-educated population, and you can probably pay them extremely competitive rates that are really useful for them, there, consider doing that. It might be hard finding a good freelancer right now, because as far as I know, there's no platform that focuses on Cuban freelancers. But if you have the know-how in Spanish to reach out to people, then it might be one of the best things you can do. Well, Boaz, this has been fascinating. I learned about a new jurisdiction where Bitcoin actually

matters, which is great because, you know, obviously the Bitcoin story is more than just speculation, but we certainly need these anecdotes to kind of drive the point home. Where would you ask people to go follow you and follow your work and your writing? Yeah, you can find me on Twitter on Subrato B or you can go on my website, which is boassobrado.com. And I think we can add some of the blog posts you mentioned to the notes. I will. I certainly will. Boaz, thanks again for coming on, man. This has been great. Thank you very much.