Jamaica’s central bank has been given the authority to issue digital currency as legal tender – a parliamentary thumbs-up set to ensure that ‘Jam-Dex’ becomes the latest central bank digital currency (CBDC) to enter circulation.
The Bank of Jamaica (BoJ) has been in the starting-blocks ready to roll out the island nation’s CBDC since the turn of the year and the passage of the Bank of Jamaica (Amendment) Act 2022 by the Senate, the Jamaican parliament’s upper house, on 3 June effectively fires the starting-gun for public issuance.
The bill had already been passed in the House of Representatives, Jamaica’s lower house, on 24 May, according to the Jamaica Information Service (JIS), which is a government agency.
The BoJ is now expected to launch Jam-Dex imminently, thereby making Jamaica the biggest nation in the Caribbean – which has become something of a CBDC hotspot – to go live with a CBDC. In October 2020 the Bahamas launched the ‘Sand Dollar’ to become the first nation worldwide to launch a CDBC and the Eastern Caribbean Central Bank launched ‘DCash’ as the first CBDC within a currency union (the Eastern Caribbean Currency Union – ECCU) last year.
Despite the Caribbean’s allure for sun-seeking holidaymakers, many people across the region live in poverty. Jamaican authorities, as well as those in the Bahamas and ECCU, have placed financial inclusion among their top reasons for their CBDC enthusiasm.
Jamaica developing national ID system
Jamaica’s minister of foreign affairs and foreign trade and leader of government business in the upper house, Senator Kamina Johnson Smith, piloted the bill through the Senate, noting that full CBDC implementation is expected to significantly reduce traditional challenges associated with many Jamaicans not having a bank account, the JIS reported.
“The main reasons given include not enough money [as] they feel you have to have [a significant sum of] money in order to have a bank account… [or] they don’t have the documentation required,” she said, noting that the island’s government is trying to deal with the issue of lack of documentation through the rollout of Jamaica’s National Identification System (NIDS). NIDS is being implemented by the Office of the Prime Minister, with the first pilot enrolment site scheduled to be established in Kingston and St Andrew by August.
Senator Johnson Smith said that Jam-Dex’s implementation will address other challenges “because no bank account will be required”.
“What you will have is a [digital] wallet,” she explained. “So, you will get a CBDC wallet issued by banks or authorised payment service providers with simpler, customer-friendly processes for easy access. It is also anticipated that the CBDC will lower the cost associated with providing a national means of payment and provide an alternative to the issuance of bank notes.”
The CBDC will also allow businesses to engage in more efficient cash management, Senator Johnson Smith said. “It is instant and doesn’t come with cash-handling fees. Similarly, its facilitation ensures that both households and businesses will be able to use the CBDC to make payments and to hold value,” she said.
Following contributions by several members of parliament, the bill was passed unanimously without amendment, the JIS reported.
Jam-Dex via NCB’s ‘Lynk’ wallet
Progress towards Jam-Dex’s launch has been steered by Natalie Haynes, who chairs the central bank’s committee for the implementation of a digital currency alongside her day-job as deputy governor for banking and currency operations and financial markets and infrastructure.
Haynes told Global Government Fintech in an interview published almost six months ago that “what we have done has been amazing in a short space of time.”
The government set out a timetable for the introduction of a digital Jamaican dollar in March 2021, with finance minister Nigel Clarke talking enthusiastically about the possibilities of CBDC in parliament (worth watching on YouTube – the CBDC section starts at about 01:19:50). BoJ announced the appointment of eCurrency Mint as its CBDC technology provider the same month.
Activities since then have included the ‘minting’ of the first batch of Jamaican CBDC in August last year: J$230 million dollars (about £1.1m)-worth of CBDC being issued to deposit-taking institutions and payment service providers (PSPs). The central bank issued J$1 million-worth of CBDC to its own staff the following day (10 August) and then, on 29 October, issued J$5 million-worth of CBDC to National Commercial Bank (NCB – a private bank).
BoJ has declared its pilot programme successful, with NCB having on-boarded 57 customers (four merchants and 53 consumers) during tests and the completion of some CBDC transactions during a special event. When Global Government Fintech interviewed Haynes the NCB was the only digital wallet provider (specifically, the bank’s ‘Lynk’ wallet) ready for CBDC – a situation that seems to remain the case now, according to a report in the Jamaica Observer. In the same report Mario Griffiths, the BoJ’s director of payment system policy and development department, said that Jam-Dex is expected to become available to the public by the end of this month (June).
The winners of a competition for a name, tagline (‘No cash, no problem!’) and logo for the CBDC were announced in February. Jam-Dex is short for ‘Jamaica Digital Exchange’.
CBDC legal aspects crucial
Growth in the number and progress of central banks’ digital currency explorations worldwide was recently highlighted in an authoritative report, ‘Gaining Momentum – Results of the 2021 BIS Survey on Central Bank Digital Currencies’. Nine out of 10 of the 81 central banks surveyed are exploring CBDCs and more than half are now developing them or running concrete experiments.
The paper points out that CBDC issuance requires a legal framework that provides the authority to do so and that, compared with last year, the share of central banks with such a legal authority increased from 18 per cent to 26 per cent. In addition, about 10 per cent of jurisdictions are currently changing their laws. But one quarter of central banks lack the required legal foundation and about 40 per cent were ‘unsure’.
Haynes told Global Government Fintech in her interview that that she had shared experiences with Sweden’s central bank the Riksbank, which is itself well progressed with CBDC experimentation, and Ghana, which she described as particularly interested “in terms of our experience with legislation”.
While the world’s larger economies, such as the US, Eurozone and UK, continue to remain non-committal to launching a CBDC (although all have significantly stepped up their research and stakeholder engagement), Jamaica wasted little time in cracking on with procuring the technology and preparing to go live. “It was a fait accompli for us that we were going to implement it,” Haynes previously told Global Government Fintech. “So, all that research in terms of pros and cons and that, you know, we kind of dropped over that and went straight to the point of ‘we are going down this route’.”
Jamaica is the largest island in the English-speaking Caribbean, with a population of almost three million. Inequality is lower than in most countries in the Latin America and Caribbean region, but poverty at 19 per cent (2017 data) is still significant, according to World Bank data.
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‘Jamaica’s central bank digital currency sprints forward: Natalie Haynes interview’ – interview (4 February 2022) with the BoJ’s CBDC implementation committee chair
‘Jamaica to launch digital currency after pilot success’ – news story (5 January 2022) on the BoJ announcing that its eight-month CBDC pilot project had been successful, with activities having included National Commercial Bank on-boarding a small number of consumers and merchants
‘Jamaica sets out digital currency ambitions’ – news story (23 March 2021) on the government setting out the timetable for a CBDC’s introduction and providing specifics on technical aspects