Home Digital Currencies Haiti hails ‘revolutionary’ possibilities of central bank digital currency

Haiti hails ‘revolutionary’ possibilities of central bank digital currency

Haiti: its central bank's governor believes a CDBC could help address many challenges in the country, which was devastated by an earthquake in 2010 | Credit: smattern, Pixabay

The Caribbean country of Haiti’s central bank plans to start testing a digital currency at the end of this year and throughout 2022.

Central bank digital currency (CBDC) has the potential to be a “revolutionary instrument for [Haiti’s] financial system”, the Bank of the Republic of Haiti’s governor Jean Baden Dubois said during an event at which he set out the central bank’s objectives as it considers a digital Haitian gourde.

Haiti is interested in launching a CBDC for two main reasons, Dubois told the online audience at the OMFIF Digital Monetary Institute Symposium 2021, a conference organised by the London-headquartered think-tank: to boost financial inclusion and to improve the dynamism and interoperability of the country’s payments systems.

Most central banks worldwide are researching or experimenting with CBDCs but few have made definite commitments to introduce them.

The Bahamas became the first country to launch a CDBC last October, with its ‘Sand Dollar’ becoming the first fully deployed digital version of a fiat currency. The Eastern Caribbean Central Bank (ECCB) launched the first retail central bank digital currency (CBDC) within a currency union just over a month ago. Jamaica is aiming to launch a CBDC in early 2022. “It seems that small islands are leading the way,” Dubois said.

CBDC’s multiple potential benefits

Haiti was devastated by an earthquake in 2010 that killed more than 200,000 people and caused extensive damage to infrastructure and the economy.

It is the poorest country in the Latin America and Caribbean region, and among the poorest countries in the world, according to the World Bank, which notes that its economic and social development continue to be hindered by political instability, governance issues and fragility. It is deemed extremely vulnerable to further natural disasters, with more than 90 per cent of the population at risk.

More than half – about 54 per cent of Haiti’s population of more than 11 million citizens – are unbanked and the economy remains largely cash-based.

A CBDC “may help address the different challenges we face”, Dubois told OMFIF’s audience, saying that central bank-issued digital money had the potential to help with financial inclusion and increase innovation and security of payments. He said a CBDC would foster interoperability in a “fragmented” payments market.    

“Reduction of cash usage can help fight informal and illegal activities,” Dubois also said, with a CBDC likely to help boost overall financial transparency, reduce fraud and also prove useful in respect of anti-money laundering (AML) and combating the financing of terrorism (CFT).

Georgia and Kazakhstan step up CBDC work

The central banks of both Georgia and Kazakhstan have also issued announcements related to CBDC.

The National Bank of Georgia (NBG) is considering launching a CBDC ‘to leverage new technologies to enhance efficiencies of the payment system and financial inclusion’ and has invited technology firms, fintech companies and ‘interested financial institutions’ to help the authority to ‘explore the frontiers of financial technology’ in what it refers to as its ‘digital gel project’.

‘CBDCs may become essential for the financial ecosystem and spur private innovation and development of new financial technologies,’ the NBG says. ‘Therefore, full private-sector involvement in technology choices, interface design, customer management, KYC [know your customer] and AML/CFT, regulatory compliance and data management will be crucial.’

In a statement providing further information, the central bank says that it will be ‘essential to start from simple solutions which can efficiently upgraded/updated and increase the scale and scope of CBDC over time’. Its documentation points out that cost ‘is a significant factor given the small size of the Georgian financial market’ and so priority will be given to ‘economical solutions with low fixed and variable costs’.

The NBG goes on to say that a CBDC’s primary focus would be retail consumers and micro-, small- and medium-sized enterprises and that the tech solution ‘should support the implementation of smart contracts and automatic payments… for example, automatic tax accounting and tax collection for simple transactions.’

Meanwhile the National Bank of Kazakhstan has published a research report on CBDC as it steps up its explorations of a potential digital tenge. It is organising an online discussion today (12 May) on its plans.

Global Government Fintech three weeks ago (22 April) organised an international webinar, in partnership with Amazon Web Services Institute (AWSI), entitled ‘Delivering Central Bank Digital Currencies (CBDCs): Exploring the Technology Challenge’.