Bank of Jamaica’s CBDC will provide a more efficient payment option to complement cash and serve the unbanked
The Bank of Jamaica (BOJ) is preparing to pilot its central bank digital currency (CBDC) next month, according to an article published yesterday in the Jamaica Observer.
The central bank will continue to issue banknotes and coins, while the CBDC will complement other forms of legal tender by providing a more efficient means of payment. The digital currency may also offer increased security: if a phone is stolen, the CBDC cannot be accessed without a passcode.
BOJ Governor Richard Byles explained: “It is instantaneous and a very efficient way to pay, in a manner that cash cannot. It will reduce the cost of producing, transporting and securing cash, which runs into billions of dollars every year. Merchants will also no longer need to search for change because payments can be made down to the cent.”
Originally scheduled to begin roll-out in May, the pilot has been delayed until August. From September, the CBDC will be distributed to authorized payment service providers, licensed commercial banks and deposit-taking institutions.
“Financial institutions will issue and sell CBDC to businesses and individuals at a rate of 1 physical dollar for 1 CBDC,” Byles added. “However, financial institutions will hold CBDC in digital wallet accounts at their respective banks so customers can access them to make purchases or receive phone-to-phone payments.”
The governor said Jamaica will need stronger telecommunications infrastructure to achieve broad CBDC adoption, along with widespread acceptance by merchants and consumers.
Many people in the country remain unbanked, and the CBDC could give them easier access to financial services without requiring full know-your-customer (KYC) verification. Byles stressed, however, that cooperation from telecommunications companies and financial institutions will be essential.
He concluded: “If you go out with your CBDC and no one wants to accept it, we will have a problem. Therefore, commercial banks will have to step up to promote it, adopt it and recommend it to their customers. We also need the Government to support and use CBDC wherever possible, whether to make PATH payments, pension disbursements or other payments.”