Minister of Finance and the Public Service Dr Nigel Clarke says that the Bank of Jamaica's new Central Bank Digital Currency (CBDC) will be rolled out by early 2022.
Speaking at the start of the 2021/22 budget debate at Gordon House on Tuesday last, Dr Clarke said that the project will be piloted this year, and the pilot is expected to end in December 2021 and the roll-out to commence early in 2022.
However, he cautioned that operationalising the CBDC will require some amendments to the Bank of Jamaica (BOJ) Act to give the bank the sole right to issue digital currency as legal tender, which is the same position the BOJ has with respect to Jamaican notes and coins.
“We are serious about economic recovery. The prime minister set up the COVID-19 Economic Task Force with thoughtful intent, and we are moving assiduously to implement the recommendations,” the minister informed the House of Representatives.
“By transitioning to a digital society, Jamaica will recover stronger. We are modernising the Jamaican economy. The introduction of Central Bank Digital Currency is about embracing reform with ambition, as we aim to recover faster and recover stronger,” he noted.
He explained that, consistent with the COVID-19 Economic Recovery Taskforce Report, the Government views the accelerated transition of Jamaica to a digital society and economy as vital to economic recovery and to recovering “stronger than before”.
Clarke said that the recent delivery of grants through the CARE Programme exposed the vast number of Jamaicans who remain unbanked. They either did not have a bank account, or the one they had was not functional.
“The Government is concerned about the size of the unbanked population. Access to financial services is essential to improving productivity and well-being. There are individual benefits and there are also spillover benefits to the society, as well,” he said.
“With recent innovations in technology, it is possible to introduce alternatives to cash that are cheaper, more secure, more efficient and that offers the prospect of increasing competition in the provision of financial services and of greatly increasing the financial inclusion in our society,” he said.
He noted that the policy of the Government is to introduce a currency which has been conceptualised by the Bank of Jamaica, which is leading its implementation.
CBDC is a digital form of central bank issued currency, which is legal tender not to be confused with cryptocurrency, which is privately issued and not backed by a regulatory authority.
CBDC is fully backed by the central bank in Jamaica, and, as with Jamaican dollars, the legislative underpinnings will be the Bank of Jamaica Act.
As legal tender, CBDC can be exchanged on a one-to-one basis with physical cash. Households and businesses will be able to use CBDC to make payments and store value at no cost.
The Bank of Jamaica will issue CBDC to deposit-taking institutions (DTIs) and authorised Payment Service Providers as now obtains. Deposit taking institutions, authorised Payment Service Providers and Telecom providers will on-board unbanked customers. Agents will have the ability to on-board customers that request a digital transaction account using their mobile device.
Customers can top-up their account with CBDC through authorised agents or smart ABMs. Customers can do business using CBDC phone-to-phone with merchants.
“This will bring the benefits of financial inclusion to tens of thousands of Jamaicans,” Clarke noted, as he explained that: Users will be able to pay for sky juice using their phones and “purchase snacks from a snack vendor on the way home”.
“The pan chicken man will be able to get paid with digital currency on his phone that he will be able to use to buy school books at the store. The potential exists for the NIS pensioner to not have to join a long line at the post office,” he pointed out.
He said that with the digital currency, more people will be included in the financial system, as it will allow for more innovation in the financial services and will provide the foundation for the digital transformation of the economy.