The existence of a centralized digital currency

Source

Hello everyone. So, here's the deal. I was reading an article about Argentina's Digital Currency project, announced by the current Minister of Economy and presidential candidate. Instantly, my curiosity kicked in because I've always been into staying up-to-date with economic news, and this topic really caught my eye.

I decided to dig a bit deeper into it, and what I found got me thinking. When I typed "countries with digital currencies" into the search engine, guess what popped up? Cuba! Yes, Cuba! I was taken aback because I knew that the Cuban economy had its quirks, but I had never heard of a digital currency there. I mean, I was picturing something like Bitcoin or Doge.

Well, it turns out that in Cuba, there's a unique and exclusively digital currency called the MLC (Moneda Libremente Convertible). However, this currency has its own set of rules, and, here's the kicker, it's centralized. That means the Cuban government has its hands all over it, at least in theory. In practice, it's a bit more complicated because the MLC isn't completely shielded from market forces, and that's led to inflation making its way into this currency and the Cuban economy as a whole.

At the beginning, the MLC's nominal value was on par with the usd, which was worth 25 Cuban pesos at the time. When I say "at the beginning," I'm talking about the years 2020-2021. But, as time went by and the consequences of Cuba's economic woes kicked in, things went haywire. Nowadays, one US dollar is worth 250 Cuban pesos, while the MLC, being digital and having a more limited scope (only functional in Cuba), has been hit by inflation but hasn't been able to keep up with the dollar. It's currently valued at 220 Cuban pesos.

Now, this whole situation is fascinating because it shows how digital currencies can be influenced by a country's economic and political conditions. Even though the MLC is under the Cuban government's thumb, it hasn't been immune to the economic challenges facing the nation.

The Cuban case also highlights the importance of decentralization in the world of cryptocurrencies. While cryptocurrencies like Bitcoin operate on a decentralized network, without government interference, the MLC is under the centralized control of the Cuban government. This means its value and operation are at the mercy of Cuban government decisions and economic conditions.

Inflation in Cuba has been an ongoing problem, and the existence of the digital MLC demonstrates that centralized solutions don't always cut it when it comes to tackling it. The Cuban economy has faced a slew of challenges in recent years, mainly due to government mismanagement and the incompetence of those at the helm, which have led to the depreciation of the national currency and, consequently, the MLC.

In contrast, decentralized cryptocurrencies like Bitcoin rely on blockchain technology that isn't subject to government control. Their value is determined by global supply and demand, making them more resilient to inflation and local economic fluctuations.

Sometimes, the daily grind blinds us to what's happening elsewhere, so I had no idea about the MLC in Cuba as a centralized digital currency. This case shows how digital currencies can be influenced by local factors and how decentralization can play a crucial role in a digital currency's stability.

References:

• eltoque.com

📷 Xiaomi Redmi 9A | 💻 Asus Celeron N4020
Original Spanish text: Translated and formatted with Hive Translator by @noakmilo.
Twitter @bluisdey

Posted Using LeoFinance Alpha