Why the Freely Convertible Currency's Value Has Skyrocketed in Cuba

In recent days, the value of the Freely Convertible Currency (FCC) in Cuba has surged dramatically, following months of relative stability in its informal exchange rate, although there have been occasional declines.

An article released by elTOQUE on Thursday delves into the reasons behind the renewed focus on the struggling FCC over the past few weeks.

Despite a five-peso drop from the previous day, according to elTOQUE, the FCC traded at an average of 290 CUP on December 11 in the informal market. This figure marks a more than 30% increase from its value at the beginning of November when it hovered around 205 CUP.

This sudden rise has once again thrust the FCC into the spotlight of national economic discussions. Is it merely a bubble, or does it signal deeper tensions within Cuba's monetary system?

The Role of FCC Amid Dollar Pressures

Economist Pavel Vidal, a researcher at the Observatory of Currencies and Finances of Cuba (OMFi), provides a structural analysis of this phenomenon.

"The FCC might be serving as a temporary alternative that the private sector has adopted to handle financial transactions previously conducted in dollars, which could explain the increase in its demand and price," Vidal is quoted as saying in the elTOQUE article published on December 11.

According to the source, recent police pressure on remittance handlers and operators in the informal exchange market has curtailed the circulation of U.S. dollars (USD), contributing to the rise in the cost of all currencies. In this scenario, the FCC has reemerged as a practical option, especially for small and medium-sized enterprises (SMEs) importing goods through state-run companies, a practice that continues despite convertibility limitations.

Beyond its direct use, market expectations are also affecting the FCC's value. Vidal explains, "It's likely that the FCC's value is also adjusting to expectations about its future (...) as market players anticipate this currency might be favored in terms of exchange rate and/or usage value as part of upcoming changes in Cuba's currency market."

Drawing Parallels with the CUC: Dolarization and Distrust

The current situation brings to mind the process that led to the disappearance of the CUC for many Cubans. The FCC, much like the CUC in its final days, is beginning to show signs of institutional wear: its utility is decreasing, it lacks real backing, and its future is uncertain.

A sign pointing in this direction is the opening of more stores that exclusively accept physical dollars, ceasing to take FCC. However, this exclusion hasn't eliminated demand:

"Ironically, this perception doesn't always reduce demand, as many users opt to purchase FCC for immediate transactions, fearing an even greater decline in its value," notes the elTOQUE analysis.

Meanwhile, the dolarization of the Cuban economy accelerates and is even acknowledged officially in the new Government Program aimed at correcting distortions.

Possible Futures for the FCC

Pavel Vidal outlines two main paths for the FCC's future as the government progresses with promised reforms to the currency market:

1. Permanent Elimination (like the CUC)

In this scenario, the State would choose to completely abolish the FCC. "They might bury it for good (as they did with the CUC) or attempt to revive it by promoting its convertibility to Cuban pesos at a more competitive official rate," Vidal suggests.

Since there are no physical FCC bills, the process would be simpler: "It would involve converting all FCC accounts, debts, and prices currently recorded in that currency to Cuban pesos, using the value of a floating exchange rate expected to be close to the informal market rate," he explained.

This would mean what remains of commerce in FCC would shift to CUP at very high rates. For example:

"Using this rate, whatever is left of FCC stores would start selling in pesos multiplied by 400, and workers receiving salaries in FCC would have their pay multiplied by this rate and receive it in pesos."

This path would further solidify the private sector's preference for operating in dollars.

2. Reconfiguration in a Dolarized Banking System

Alternatively, the government might partially revive the FCC within a more flexible and banked exchange system, with an official floating rate:

"If this measure is implemented, banked currency exchange operations could be enabled, alongside physical money transactions at counters," Vidal predicts.

This could allow, for instance:

• Converting remittances into CUP using the official floating rate.
• Loading prepaid cards in CUP from received dollars.
• Using the FCC as an intermediary currency in banks' currency sales.

"This would be the mechanism for buying dollars through banking channels," Vidal illustrates.

"If the new official exchange scheme includes banking operations, the FCC might find some place within that system," he added.

However, this second route faces a significant hurdle: the FCC's loss of credibility.

"Nonetheless, this path would encounter many obstacles, given the strong discredit this currency carries. Despite the recent appreciation, in the informal market, the FCC is worth about 40% less than the U.S. dollar," the analyst concludes.

A Volatile and Fragile Market

As seen in previous instances, Cuba's informal market reacts extremely sensitively to rumors, temporary shortages, police actions, or government announcements. The events involving the FCC in November and December of 2025 demonstrate that the monetary system remains vulnerable and unstable.

The rise of the FCC is not merely a temporary issue: it reflects the confusion and structural gaps in Cuba's economic system, the anticipation of pending reforms, and the lack of clarity about the fate of circulating currencies. Meanwhile, the population and entrepreneurs strive to adapt, operate, and survive in an uncertain environment.