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The impending introduction of digital currencies into Jamaica’s financial situation will be a game-changer that will move the country forward and expand financial inclusion, prominent local economists and technical experts have said.

They are responding to the Bank of Japan’s announcement that digital currencies are expected to be introduced in early 2022, and the pilots will be tested in the Bank of Japan’s FinTech-regulated sandbox by December of this year. . I am.

Digital currencies are primarily currencies that are managed, stored or transferred electronically.

“The potential for unrest is great. What the Bank of Jamaica is trying to do is issue digital currencies in a way that is not destructive and retains the traditional role of commercial banks, ”said the Caribbean Policy Study. Dr Damian King, economist and secretary general of the institute, said. Corsair).

He explained the benefits of digital currencies, which lower transaction costs, do not bear storage costs, minimize risk and are easy to trade.

“It’s a breakthrough for the economy because it allows us to do everything we couldn’t do before. This makes it easier to pay for people who don’t have micropayments and bank accounts. Sell ​​around the corner. You could buy drinks with mobile payments from a man who has a bank account, ”he explained.

In addition, he said that digital currencies will increase the efficiency of the economy and reduce the huge cost of trade. It also addresses the issue of financial inclusion.

“One of the advantages of digital currencies is that even people who do not have a bank account can perform mobile transactions, which allows them to use digital currencies,” he said.

Chevaughn Robinson, senior software developer at MC Systems, a technology company in the Jamaica National Group, said central bank digital currencies minimize eligibility requirements to participate in the financial system, as well as access and inclusion people without a bank account. Said to promote.

“The ability of a person without a bank account to be part of a formal financial system is a bonus because they have access to savings, loans and credit facilities,” he said.

Digital currency and mobile money

Dr King discusses the possibility that the introduction of digital currencies will follow the same fate as mobile money, which has yet to begin in Jamaica despite its introduction a few years ago, and the response to digital currencies issued by central banks is different. I guess it’s possible from a bank that issues mobile money.

“The situation is different because everyone is on the same platform. Before everyone needs to register with a provider. Now, anyone who wants to issue a mobile wallet will have the underlying architecture of Jamaica Bank. It will be published and will be interoperable, ”he said.

“That is, anyone who issues a mobile wallet can pay to another wallet owner, which helps ensure interoperability and scalability,” he said.

Robinson was equally optimistic. “For the first time in history, a central bank-backed e-money solution has emerged, offering a unified and fair solution to all financial institutions, interconnected and interoperable with existing financial systems. This is a great opportunity to address inefficiencies and gaps in the existing financial infrastructure, which traditional mobile money solutions have not been able to achieve independently of the central bank. “

However, Robinson said there are some important criteria that must be met for the system to be successful.

“Barriers to entry need to be very low, like cash, and everyone needs to be able to participate with minimal friction and documentation requirements. This system is POS (point of sale), online. It must be interconnected with existing financial systems such as banking, e-commerce and ATM infrastructure, ”he said.

Leading software developers further stated that the systems must provide open and fair access to drive innovation by SMEs. He also said he needed to be able to seamlessly access cash when needed and be able to convert cash into digital currencies 24/7.

How it works?

According to the Bank of Japan, the Central Bank’s digital currency (CBDC) is not a cost to consumers, but a perfect complement to banknotes and coins issued by the Bank of Japan. CBDCs and physical banknotes and coins coexist in the payment space. The CBDC has a major aspect of money, as it is now available in banknotes and coins, but the only significant difference is that it is an alternative to cash, which is mainly used for trade. However, like cash, it is becoming the norm for face value stores, exchange media, single account units and payments.

As a fiat currency, the Bank of Japan has stated that the CBDC can be exchanged for physical money on an individual basis. Households and businesses can use the CBDC to make free payments and save value. However, unlike cash, consumers can use the CBDC to make payments on compatible devices anytime, anywhere.

The central bank’s digital currency issued by the Bank of Japan is for domestic use only, and the Bank of Japan has announced that it will use a hybrid model to issue CBDCs. Therefore, the Bank of Japan issues not only to commercial banks, but also to other deposit processing institutions (DTIs) (construction and credit associations, investment banks, authorized payment service providers (PSPs) ). All of these are authorized or authorized by the Bank of Japan. These entities distribute the CBDC to the retail market.

To use the CBDC, the Bank of Japan declares that consumers must have a CBDC account. It’s an increasingly easy acquisition with streamlined and simplified Know Your Customer requirements, also known as KYC, unlike traditional bank accounts. .. If you already have a bank account, you can automatically get a CBDC account, but authorized PSPs and DTIs can embark customers who do not have a bank account. Customers will be able to seamlessly transfer and convert funds between their regular accounts and CBDC.

To execute CBDC transactions anytime, anywhere, consumers use the networks of the two major telecommunications service providers to access, download, and download mobile wallet apps on smartphones, tablets, or similar compatible devices. Can be deployed. Customers can also top up their accounts with the CBDC through all authorized agents or the smart ATM and do business with the CBDC over the phone with merchants.

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