The Bank of Jamaica (BOJ), now on the cusp of rolling out its much anticipated Central Bank Digital Currency (CBDC).
The BOJ says that it will pilot a introduction of the service across financial institutions starting next month.
The delayed project integration , which should have started in May, will commence with the National Commercial Bank (NCB) where customers will be introduced to the new currency. “We’re currently looking at all the technical sides of the system. We are working within the banking sandbox where we continuing to build our infrastructure”. “As we work through the technical aspects of the currency, it is imperative that we validate the CBDC through rigorous testing”. “As our pilot-roll out time is set for August”.
“In September to December we’ll be recruiting more banks to come onboard. Following this, we plan to gradually expand the project out into a full-fledged launch of the CBDC,” said BOJ Governor Richard Byles, while elaborating on the details of the planned service.
The Governor, who was speaking at a Rotary Club installation ceremony last week, said that the CBDC, which was not the same as the more private based cryptocurrency, will only be sold to licensed commercial banks, deposit-taking institutions (DTIs) and payment service providers authorized by the BOJ. The issuance and distribution of the currency will also be fully integrated with the financial market infrastructure or Real Time Gross Settlement System (RTGS) used by banks.
“The financial institutions will mint, sell, the CBDC to businesses and individuals at a rate of $1 in cash to 1 CBDC. However, the financial institutions will hold the CBDC in digital wallet accounts at their respective banks. Customers will be able to access there wallets in order to make purchases, or receive payments from their mobile devices,” he stated.
The CBDC, now a form of legal tender, will complement the fiat and coins issued by the Central Bank.
Byles, speaking about the benefits of using digital currencies, said that it was in most cases far more efficient than cash.
“It’s instantaneous and its a very efficient way of making payments, in a way that cash doesn’t. It will reduce the cost of producing, transporting and securing cash which accelerates into billions of dollars each year. There will also be no need for merchants to have coins for change, as payments are made to the precise amount ,” Byles stated, indicating that in cases where a phone is stolen, the CBDC cannot be accessed without a code, hence offering even more security.
He also called on the assistance of financial institutions and telecommunications companies in helping the Central Bank to reach more customers as well as to attract more of the unbanked population. This, as people who do not have regular bank accounts will also be allowed to access CBDC accounts in a way deemed easier and without the mandatory know your customer (KYC) requirements.
The Central Bank Governor also said that for the service to become mainstream, there will be the need for a far more robust Telcos infrastructure coupled with high levels of merchant and consumer acceptability. He said that with Jamaica being among some of the few countries in the world now at testing phase for this digital currency, every effort must be made to ensure its success as another of those winning moves for the country.
“If you are walking around with your CBDC and nobody wants to take it, we’ll have a problem. The commercial banks will therefore need to put their shoulders behind the wheel as they promote, adopt and recommend it for use to their customers. We also need Government to support and use CBDCs as much as possible, whether to make PATH, pension or other payments,” Byles stated.
