Cuban Peso (CUP)

What Is the Cuban Peso (CUP)?

The term Cuban peso (CUP) refers to the official national currency of Cuba. Also known as moneda nacional, the Cuban peso is represented by the symbols $ and $MN and by the code CUP on the foreign currency exchange market. Issued and maintained by the Central Bank of Cuba, CUP was one of two currencies used on the island nation until 2021, the second one being the Cuban convertible peso (CUC). Banknotes come in denominations that range from $1 to  $100. Coins are minted in values from one centavos to $3.

Understanding the Cuban Peso

As noted above, CUP is the official national currency of Cuba. It was used in conjunction with the convertible peso in a dual currency system for commerce in the local economy, including the payment of employee salaries by employers. The convertible peso was primarily meant for international transactions and forex purposes until the government decided to discontinue its use in 2021.

The Cuban peso was first introduced in 1857 when it replaced the Spanish real. The division into centavos began in 1869. One peso is made up of 100 centavos. Banknotes are printed in $1, $3, $5, $10, $20, $50, $100, $200, $500, and $1,000 denominations. CUP coins are minted in values of one, two, five, 20, and 40 centavos. There are also $1 and $3 coins that are minted and circulated.

Banco Central de Cuba or the Cuban Central Bank is the government authority that issues the national currency. Established in 1997, the bank is also responsible for monitoring the country's economy and implementing monetary policy. It also leads Cuba's national banking system through nine commercial banks and a series of other institutions.

The currency was pegged to the U.S. dollar in 1881 but switched to being linked to rubles in 1960. After the fall of the Soviet Union, the Cuban peso began to float freely against other currencies before the introduction of the Cuban convertible peso (CUC).

Special Considerations

Cubans were prohibited from using the U.S. dollar for quite some time. But the greenback became part of the country's currency circulation alongside the CUP when the country adopted the dual currency system, after the fall of the Soviet Union. The country was forced to open up to tourism because of the economic crisis that ensued at the time. Most Cuban businesses began accepting the greenback.

But the country withdrew the U.S. dollar in retaliation for continued American sanctions. The United States has had a trade embargo against Cuba that has been in place since 1961 and remains in effect to date. Efforts to re-establish relations between the two countries began in 2014 but have stalled again.

History of the Cuban Peso

Cuba was a Spanish colony for several centuries. As such, the prevailing currency used in the country during that time was the Spanish real. Once Cuba gained independence from Spanish rule in 1898, it became a republic in 1902.

The Cuban peso found its place in the island nation a few years earlier, though. It replaced the Spanish real as the country’s official currency in 1857. At the time of the switch, eight pesos were worth one real.

The country's economy is centrally planned. As such, it is managed and run by the central government. The majority of Cubans work for the government, with unemployment reaching 2.8% in 2021. Gross domestic product (GDP) per capita amounted to about $9,478 in 2020. Continued economic instability—especially in the wake of the global COVID-19 pandemic, U.S. sanctions, and an informal currency market—has led the CUP to plummet in the foreign currency market.

Cuban Peso (CUP) vs. Cuban Convertible Peso (CUC)

Cuba established a dual currency system when it began circulating the Cuban convertible peso in 1994. This currency was abbreviated as CUC and was also represented with the symbols $ and $MN. Denominations in CUC were the same as in CUP for both banknotes and coins.

While the peso was used for local commerce—namely, to purchase staples and non-luxury goods—the CUC was used for luxury goods and tourism, which is why it was called the tourism dollar. The convertible peso was tied to the U.S. dollar and was generally traded and used by Americans in Cuba. It was pegged at par with the greenback.

The council of ministers in Cuba approved a plan in 2013 to unify the two currencies. Plans were officially announced in 2020 to begin the process in 2021. The process got stretched out into 2021 because of the global COVID-19 pandemic. As of July 1, 2021, convertible pesos were no longer accepted by retailers and other commercial merchants.