Jamaica’s government has set out the timetable for the introduction of a central bank digital currency (CBDC).
A pilot currency will be tested in the Bank of Jamaica’s (BoJ) fintech regulatory sandbox from May to December, with the aim of launching a Jamaican CBDC in early 2022, the government has announced, while also providing specifics on technical aspects.
The Caribbean island wants to launch a hybrid digital currency that aims to combine the benefits of retail and wholesale CBDC, according to a statement released on 21 March by the Jamaica Information Service (JIS), which is a government agency. A retail CBDC is one issued for the public, while a wholesale CBDC is for financial institutions that hold reserve deposits with a central bank.
Another island nation, the Bahamas, launched a CDBC six months ago – the first fully deployed digital version of a fiat currency. Most central banks worldwide are researching or experimenting with CBDCs but few have made definite commitments to introduce them.
‘Non-blockchain CBDC option’
JIS’s announcement also contains details on Jamaica’s approach to the technical aspects of the planned digital currency, which would be solely for domestic use.
A section of JIS’s statement entitled ‘Choice of technology – not blockchain’ explains that the CBDC will be integrated with the central bank’s Real Time Gross Settlement System (RTGS), JamClear.
‘It is this consideration and prerequisite that led to BoJ choosing a non-blockchain CBDC option,’ the announcement says. ‘Not using the blockchain technology that is often associated with CBDCs is not because of any major concerns with blockchain, but rather that BoJ is mindful of the importance of utilising a technological solution that would as seamlessly as possible interface with the country’s payment infrastructures. Consequently, the solution that BoJ has opted for adapts to traditional technology which is easily integrated with the bank’s RTGS.’
A legislative review to amend the Bank of Jamaica Act to ‘concretise’ the BoJ as sole issuer of CBDC is ‘well underway’.
Prospective benefits of a CBDC include driving financial inclusion, as unbanked citizens will be able to access CBDC accounts ‘in a way that will be easier and simpler than accessing regular bank accounts’, according to the JIS announcement. The CBDC should also create opportunities for the launch of complementary innovative products and systems, while the financial system should benefit from greater efficiencies, as well as reducing the costs associated with cash, the announcement adds.
‘CBDC is the real thing’
The government’s enthusiasm for a CBDC was also outlined by finance minister, Nigel Clarke, during the Budget Debate on 9 March.
“It is the policy of this government to introduce a central bank digital currency which has been conceptualised by the Bank of Jamaica, [which] is leading its implementation,” Clarke told the parliamentary chamber, emphasising how a CBDC differs from private cryptocurrencies.
“CBDC is the real thing, backed by the central bank in Jamaica, just like Jamaican dollars – it’s the same money, interchangeable with Jamaican dollars cash. It will be underpinned the Bank of Jamaica,” Clarke said, saying that a CBDC would “bring the benefits of financial inclusion to tens of thousands of Jamaicans”.
Clarke added – to the delight of his parliamentary colleagues – that “you’re going to be able to pay for the [popular drink] Sky Juice with your phone, and the Sky Juice vendor can [then] take the digital currency that you pay for with your phone and use it to buy snacks from the vendor on her way home.”
‘Easier and simpler’ for citizens
Jamaica has a population of almost three million people and is the largest island in the English-speaking Caribbean. Inequality is lower than in most countries in the Latin America and Caribbean region, but poverty at 19% (2017 data) is still significant, according to the World Bank.
In order to use the planned CBDC, citizens will need to have a CBDC account, which will be different from a regular bank account and ‘much easier and simpler’ to obtain, with ‘streamlined and simplified’ know-your-customer (KYC) requirements, according to the JIS statement. Citizens with bank accounts will be able to ‘automatically’ obtain a CBDC account, while authorised payment service providers (PSPs) and deposit-taking institutions (DTIs) will be able to on-board unbanked customers.
The BoJ announced the creation of its regulatory sandbox in June last year and received 43 submissions ‘from entities across the globe’ to test CBDC solutions in the sandbox, according to the central bank’s 2020 annual report. Clarke said during his Budget address that the cabinet had approved procurement for the county’s CBDC system the previous day.
WATCH Finance minister Nigel Clarke updates parliamentarians on Jamaica’s plans for a CBDC in the Budget Debate (the section on CBDC starts at about 01:19:50)
Credit: TV Jamaica / Public Broadcasting Corporation of Jamaica (PBCJ) livestream (via YouTube)
ATTEND ‘Delivering Central Bank Digital Currencies (CBDCs): Exploring the Technology Challenge’ – upcoming Global Government Fintech webinar, supported by our knowledge partner Amazon Web Services, on 22 April 2021