Jamaicans are being asked again to beware of using cryptocurrencies to carry out transactions.
The warning comes again from the Bank of Jamaica (BOJ) which is growing increasingly uneasy about the use of the digital currency. The BOJ told the Jamaica Observer's Business Observer, “The bank is playing its role as a responsible central bank to caution our citizens, as we have done in the past. The last notice of this nature was issued in 2018, this is merely a reminder.”
The BOJ is echoing the concerns of many other central banks around the world which are all becoming increasingly concerned about a medium of exchange that they cannot control.
India, in one of the more extreme responses, is developing legislation to ban cryptocurrencies, fining anyone trading in the currency or even holding such digital assets. This Bill is said to be one of the harshest globally, aiming to criminalise possession, issuance, mining, trading and transferring crypto-assets.
Bank of France Governor Francois Villeroy de Galhau is a policymaker who has advocated that the technology be issued and controlled by central banks. He says that they should not be issued by private companies, such as Facebook's crypto Libra.
Among the BOJ's concerns is the volatility of the digital currency.
The crypto market is volatile compared to traditional stocks. Bitcoin, for example, rose from US$45,000 per unit in March 2021 to a high of US$63,000 in mid-April — then plunged to US $35,000 in May before rising up to $36,000 in June.
BOJ, in its most recent public warning, said it is reminding the public of the potential risks of using or investing in cryptocurrencies, as stated in previous advisories.
It stated, “Cryptocurrencies are digital currencies that are not issued or guaranteed by a central bank or a monetary authority. In addition, cryptocurrencies are not legal tender in Jamaica. Bank of Jamaica does not regulate or supervise these forms of digital currencies.”
It said that, in that context, the public is again being cautioned to be aware of the various risks associated with the use of cryptocurrencies including high volatility causing significant fluctuation in value; the use of cryptocurrencies in the conduct of criminal activities, including money laundering and the financing of terrorism; higher degree of cyber-fraud/hacking.
The BOJ also warned of settlement risks that may arise as this currency is not issued or backed by the central bank or other monetary authority.
It added, “The public should be mindful that individuals engaged in the use of cryptocurrencies are doing so at their own risk and are urged to conduct appropriate due diligence.”
Ramon Small-Ferguson, CFA,vice-president, Asset Management & Research, Barita Investments Limited, told the Business Observer, “While we're supportive of ...efforts to broaden the range of investment securities available to local investors, cryptocurrencies are still fairly new, they tend to trade with high volatility and are difficult to value.
“We therefore believe prospective investors ought to first invest the time to understand the nature of the risks associated with any investments they make in these assets.”