The Government says Jamaicans will have access to digital currency by next year as the Holness Administration advances on strategies to transform the nation into a digital society.
Making the announcement in his presentation to open the 2021/22 budget debate in the House of Representatives yesterday, Finance Minister Dr Nigel Clarke explained that the central bank-issued currency would be interchangeable with Jamaican dollar currency.
He stressed that this is not to be confused with cryptocurrency, which is privately issued and is not backed by any regulatory authority.
“Central bank digital currency is the real thing, backed by the central bank, just like the Jamaican dollar — same money,” he said, noting that households and businesses will be able to use this currency for varied transactions.
Digital currency is available only in digital or electronic form, and not in physical form. It is also called digital money, electronic money, electronic currency, or cyber cash. It is exchanged using technologies such as smartphones, credit cards, and online cryptocurrency exchanges.
Dr Clarke advised that the Bank of Jamaica (BoJ), which is driving the process, will issue digital currency to deposit-taking institutions and authorised payment providers in the same manner that it issues cash.
“Customers can do business with other people directly using central bank digital currency,” he said.
He advised that Cabinet approved procurement of the system on Monday and that there are plans to have it piloted this year.
The BoJ Act is to be amended, giving the central bank the sole authority to issue digital currency.
Dr Clarke said digital currency will make transactions easier for the average Jamaican, particularly those who are not a part of the formal banking system. He said pensioners could potentially receive their payments and carry out transactions in digital currency.
“This will bring the benefits of financial inclusion to tens of thousands of Jamaicans. You're going to be able to pay for the sky juice with your phone, and the sky juice vendor can take the digital currency and use it to buy snacks from the vendor... the pan chicken man will be able, with digital currency on his phone, use what he gets from the pan chicken stall and buy schoolbooks from the store,” Clarke told the House.
He said this transition would allow for more innovation in financial services and provide the foundation for a digital transformation of the economy that would help the country to emerge stronger from the COVID-19 crisis.
Commenting on Dr Clarke's announcement, Sophia Whyte-Givans, public financial management consultant with the World Bank, noted that digital currency is the future.
“While there may be initial resistance, especially among the more aged population who still view money as a physical construct, it is a part of digital transformation that youth will gravitate to and embrace,” said Whyte-Givans, principal of SWG Research & Analytics who is also working primarily with disaster risk financing in the Caribbean.
“Digital currency will result in financial empowerment, especially in the micro business sector and for the unbanked,” she said. “What would be even more transformational is if it is linked to remittances. Imagine not having to join a line at Western Union or MoneyGram, but having these resources available on one's phone to facilitate e-payments.”
Clarke also announced that amendments to the BoJ Act would come into effect on April 16, making the central bank operationally independent and accountable to Parliament.
“For the first time the governor [of the BoJ] will account to the people of Jamaica through Parliament, through regular appearances before the Standing Finance Committee, and the Government will no longer be able to, on the whim of the minister of finance, borrow money from the central bank through the printing of money. The minister will have to do so transparently, seeking affirmative consent of the House, and only in emergencies,” the finance minister stressed.
He said, with this move, the Government would be detaching the monetary policy cycle from the political cycle, giving the BoJ the power and independence to pursue its objectives.
Clarke argued that households, businesses and investors would therefore make longer-term decisions which will deepen financial markets, increase financial inclusion and broaden financial opportunity.
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