KINGSTON – The Bank of Jamaica (BOJ) said it anticipates that the introduction of a Central Bank Digital Currency (CBDC), scheduled for next year, will serve to bolster government service delivery and boost financial inclusion for a greater number of Jamaicans.
BOJ governor Dr. Richard Byles said the challenges arising in relation to the deployment of funds to beneficiaries under the multibillion-dollar coronavirus (COVID-19) Allocation of Resources to Employees (CARE) programme, highlights the need for the CBDC.
“The simple act of trying to get government support out to those who [were] most in need became very difficult because many Jamaicans are not part of the financial network and also because a lot of the banking [arrangements are] still not digitised,” he said.
“I think that there is a greater need for financial inclusion and digitisation of the Jamaican economy, and that is one of the issues that we hope to rectify with the CBDC.”
Byles was among officials addressing a Growth Inducement Programme annual digital Economic Growth Forum of the Planning Institute of Jamaica on Thursday, held under the theme “Towards Long-Term Resilience and Stable Growth”.
BOJ deputy governor Robert Stennett told the forum the CBDC is intended to be fully accessible to all stakeholders.
“It will facilitate the ability of the public sector to engage with stakeholders…much easier, particularly where welfare payments are concerned,” he said.
Stennett said that in several instances, welfare payments required significant time and energy by beneficiaries to go to financial institutions to get the funds.
“With the CBDC, their account, if they get one, will be instantaneously credited…and to the extent that the facility is in their area, they will be able to [access] it without any cost,” he said. “So financial inclusion will be enhanced in the sense that people will now have greater access to this particular financial service.”
Stennett said the Central Bank will also benefit from a significant reduction in the costs associated with procuring and disbursing currency through local financial institutions.
“The CBDC is essentially a one-for-one replacement with currency, so all the features of the physical paper will be reposed in the digital currency [and] it will be fully acceptable as a means of payment,” he said. “We expect to actually come out net positive after we have replaced a unit of currency with CBDC.”
The BOJ will undertake a seven-month CBDC pilot, from May to December this year, utilising its Fintech Regulatory Sandbox.
The Sandbox is designed to provide a platform to encourage innovations in financial services and promote competition and financial inclusion, as well as inform the framing of new or amendment of existing regulations.
Republic of Ireland-based technology provider, eCurrency Mint Incorporated will support the BOJ in testing the CBDC during the pilot phase and the subsequent full roll-out next year.
CBDC is a fiat currency, which means it can be exchanged, dollar for dollar, with actual cash, and is issued to licensed deposit-taking institutions (DTIs) on a wholesale basis.
Individuals, households and businesses can use it to pay for goods and services as obtains with cash.
According to the BOJ, the benefits to be derived by citizens, businesses and the government from the adoption and introduction of a viable digital currency solution include increased financial inclusion and another means of efficient and secured payments.
Additionally, the BOJ said CBDC represents an opportunity for DTIs to improve cash management processes and costs.
The Bank will continue to issue notes and coins to facilitate all economic activity.
(CMC)
