Jamaica on track to rollout Central Bank Digital Currency

JIS | The Deputy Governor of the Bank of Jamaica (BOJ), Natalie Haynes, has said that Central Bank Digital Currency (CBDC) implementation is consistent with the government’s overall financial inclusion strategy.

“Financial inclusion is access by all to financial services and products and is a critical factor of Jamaica’s digital transformation. The Bank of Jamaica contributes to this by acting in its role as technical secretariat of the country’s national financial inclusion strategy,” noted Haynes.

Through the CBDC, the BOJ will contribute to the financial inclusion process by enabling Jamaicans to seamlessly access financial products and services.

“CBDC is simply a digital form of money issued by a central authority. The Bank of International Settlements defines CBDC as a digital payment instrument denominated in the national unit account that is a direct liability of the central bank. In other words, the Central Bank is responsible for the CBDC that is issued,” Haynes explained.

“With amendments to the Bank of Jamaica Act, CBDC will become legal tender. Legal tender means that all merchants, whether for goods or services, will confidently accept CBDC and know that they will get value for the good or the service that they provided,” she added.

The Deputy Governor told reporters that the central bank will be using the hybrid approach in introducing its CBDC.

“BOJ will not be issuing CBDC directly to retail customers. We are going to be issuing directly to deposit-taking institutions (DTI) that are licensed under the Banking Services Act; these are commercial banks, building societies, and merchant banks,” she outlined.

She added that in order to foster financial inclusion, “we will also issue to a group called payment service providers, that are currently operating and testing payment products in the bank’s FinTech regulatory sandbox”.

The BOJ will be issuing CBDC to payment service providers and DTIs who, in turn, will distribute it to their customers, clients, merchants and consumers through either an e-money wallet, card networks or other digital options for persons and entities to utilize in transactions.

“In this case, the BOJ issues to wallet providers (the collective name for DTIs and payment service providers) on a wholesale basis, just as we do with physical cash. When a bank wants physical cash, they place an order with BOJ and then they send their cash in transit courier to BOJ to collect the cash. In this case, they will still place their orders with BOJ, and we will issue them with the digital currency,” Haynes explained.

The Deputy Governor reassured Jamaicans that the CBDC will add to the current pool of retail payment instruments in Jamaica, such as debit and credit cards, as well as prepaid cards offered by payment service providers.

“Think of it, basically, as cash that you have in your wallet. In this case, you’re going to have a digital purse or wallet. It is not e-money, which is a liability of e-money issuers, and, of course, because it is very much like cash, it does not earn interest. CBDC in Jamaica is going to be only for domestic use and will not be used for cross-border transaction,” she said.

According to the Deputy Governor, one chief benefit of the CBDC is that there will be a more inclusive system for persons where every citizen will have a quick, safe and reliable digital retail payment instrument.

“It is more efficient than cash. It is instantaneous, even for remote transaction, meaning you don’t have to be in front of the person. For cash, you have to be in front of the person to exchange cash. We can do person to person, person to business, and it goes both ways,” she added.

To access the CBDC, the Deputy Governor said customers will need to have a wallet, which is going to be different from your regular bank account. She also stated that once an individual has a relationship with a bank, in that they already have a bank account with them, they can automatically get a CBDC account. For those who are unbanked or do not have an account, then DTIs and authorized payment service providers will be able to onboard these individuals, who can then request a CBDC account.

To carry out CBDC transactions, consumers will be able to access, download and deploy a mobile wallet app on any mobile phone, tablet or similar device using the networks of both major telecoms service providers. Customers will be able to top up their accounts with CBDC through all authorized agents or smart ABMs and do business using CBDC phone-to-phone with merchants.

“To get a CBDC wallet, simply contact your wallet provider of choice. If you do not have a bank account, all you need when setting up your CBDC account is your name, Tax Registration Number, and government-issued photo ID – driver’s license, passport or voter ID card” – the Deputy Governor said.

When the CBDC is fully launched, all Jamaicans will be eligible for a CBDC wallet subject to the simplified KYC (know your client) and the wallet providers’ risk assessment of the customer.

The Bank of Jamaica is slated to commence a national rollout of the CBDC platform during the first quarter of 2022.