Summary
This is a request for interpretative guidance on the following:
Background
My name is Tim Parsa (LI, TWT). I am a U.S. citizen, fintech entrepreneur, co-founder of Uphold, Airtm, Cadoo, Air Protocol, and Slyk. I am also a U.S.-trained lawyer, sworn before the bar of New York, and well-versed in the compliance requirements of FinCen-registered MSBs, including compliance with BSA and OFAC. I established the compliance programs for Uphold (founded 2013) and Airtm (2015), serving both startups (at different times) as CCO and BSA officer.
Building crypto and bank connected fintech startups over the past ten years has taught me that compliance with U.S. law and innovation using new financial technology are equally essential for fintech startup success.
In 2018, Airtm (a USD-denominated e-wallet) was widely adopted in Venezuela by individuals and businesses to convert their rapidly devaluing Bolivares to USD value in their Airtm account. This was possible because of Airtm’s U.S. bank connections and its network of Venezuela-based P2P forex agents who earn a fee for facilitating the exchange of Bolivares for AirUSD (and vice versa) via their Airtm account. See Scaling Stranger-to-Stranger Services for more detail on Airtm’s P2P forex innovation.
In 2019, Airtm was recognized as the most reliable source of the free market (vs. govt-rigged) Bolivar/USD exchange rate by the world’s foremost expert on hyperinflation and currency boards, Professor Steven Hanke of Johns Hopkins University (Forbes Article). The authoritarian Maduro regime responded to Airtm’s rapid adoption by attempting to block access to Airtm, disrupt Airtm’s P2P forex agent network, arrest Airtm’s Venezuela-based employees, and intimidate Airtm’s Venezuelan clients. These efforts failed and arguably contributed to Airtm’s continued adoption in Venezuela as an alternative to Maduro’s broken financial system and failed monetary policy.
In 2020, Airtm was selected by the Venezuelan government in exile of President Juan Guaido for the distribution of funds seized from the Maduro government by the U.S. Treasury Department. Airtm has distributed over $50MM in funds pursuant to an OFAC license to 67,000 Venezuela-based health workers on the front lines of the pandemic. See Reuters, WSJ articles (1, 2).
In December of 2020 I made contact via Twitter with several Cuba-based fintech founders who had recently launched Bitremesas, in response to the main Cuba-based remittance payment processor, regime-controlled Fincimex, rightfully being placed on the OFAC black list.
After speaking with Bitremesas founders and other independent digital entrepreneurs in Cuba, it occurred to me that Airtm’s P2P solution could compliantly operate in Cuba as it does in Venezuela. This impression was reinforced by a virtual round table organized by Zack Haas, the Sanctions Team Lead for the Office of Cuban Affairs at the U.S. Department of State, who invited me to share my experience in Cuba in the meeting along with representatives from Kraken, Coinbase, and Stripe, among others.
In early 2021, one of the fintech founders I had befriended, Erich Garcia, launched Qvapay, a dollar-denominated e-wallet with functionality specific to Cuba, i.e. with a Cuba-based P2P marketplace facilitating exchange of $SQP (Qvapay’s dollar-denominated token)-to-CUP (Cuban Pesos) and MLC (Cuba dollar equivalent).
As of today, Qvapay has over 50,000 active accounts, predominately used by independent digital entrepreneurs who are paid by clients in $SQP. These clients register QVApay accounts and deposit funds via cryptocurrency, e-wallet, or P2P exchange of bank money, for credit as $SQP.
In May of 2022, the Biden administration announced new policy initiatives supporting local entrepreneurs and remittance flows (1, 2).
Motivation
My principal motivation in requesting this interpretation is to reassure Airtm’s compliance and legal functions, as well as the board of directors that Airtm can compliantly offer its services to Cuba-based independent entrepreneurs, both individuals and entities.
Compliance alarmism and “overcompliance” (a term Zack Haas introduced me to), rather than legal analysis and fintech innovation is, unfortunately, the default for all fintech startups subject to U.S. jurisdiction due to the potential financial liability from violations of the OFAC Cuba sanctions regime.
My secondary impetus for requesting interpretive guidance is to support the success of Cuba-based independent digital entrepreneurs, thereby creating robust Cuba-based networks of globally-connected free market capitalism and entrepreneurship. These networks of free enterprise exist outside the censorship, coercion, or control of the sanctioned regime, and provide no direct benefit to sanctioned individuals, entities, or the sanctioned regime. To the extent that financial service providers subject to U.S. jurisdiction are reassured by the requested interpretative guidance, they will be more likely to facilitate payments to independent digital entrepreneurs in Cuba, as well as their startups. This will undermine the sanctioned regime in Cuba by providing alternatives for talented Cuba-based individuals to learn, earn, and build wealth outside the control of the government.