JAMAICA DIGITAL EXCHANGE – JAM-DEX – Jamaica’s CBDC

On the 17th of February the BOJ published the name, logo, tagline and image for the Bank of Jamaica’s digital currency “JAM-DEX” See the press release for full details: https://bit.ly/3BrSHZc.

According to BOJ The National Roll-Out of the central bank digital currency (CBDC) is set for the 1st quarter 2022 with the activities listed to occur include:

1. NCB will continue onboarding existing customers and new customers;
2. Two additional wallet providers, who are now conducting virtual simulation testing, will be able to order CBDC from BOJ and distribute to their customers; and
3. The testing of transactions between customers of various participating wallet providers will be undertaken – interoperability.

Meanwhile in our neighbours the US through the Federal Reserve published a report “Money and Payments: The U.S. Dollar in the Age of Digital Transformation” in January 2022, where they outline the varying use cases for CBDCs, but the Federal Reserve appears primarily interested in investigating the use of a CBDC as an additional type of central bank money available to the public, one that would allow the public to make digital payments.

The Federal Reserve, in its analysis made suggestions that if a U.S. CBDC were to be created, it would best serve the needs of the United States if it were designed to include the following elements:

1. Privacy to balance the privacy rights of the individual with the transparency required to deter criminal activity.
2. An intermediated CBDC that would allow the private sector, likely commercial banks and regulated nonbank financial service providers, to offer accounts or digital wallets to manage CBDC holdings and payments while keeping the liability on the Federal Reserve.
3. The CBDC to have the ability to be transferred seamlessly between different intermediaries.
4. A CBDC would have to verify the identity of the person accessing CBDC as financial institutions verify their customers today.

Apart from that, the Federal Reserve identified the following potential benefits of a CBDC:

• offering the general public broad access to digital money free from credit and liquidity risk;
• improving cross-border payments;
• helping to preserve the international role of the U.S. dollar as the world’s reserve currency;
• allowing for access to digital payments to financially vulnerable communities;
• extending public access to another form of central bank money, as the use of cash has decreased in recent years.

Sounds familiar? check out Digital Currency ….Should I care?

Alongside the benefits, the Federal Reserve identified a few risks and policy considerations for a CBDC. Those are: a potential fundamental change to the structure of the current U.S. financial system by changing how the central bank and private sector operate; the potential outflow of funds from commercial banks during a financial panic; the effect on monetary policy; the difficulty of balancing consumer privacy and the prevention of financial crimes; and cybersecurity threats as a CBDC network may potentially have more entry points than existing payment services.

Where they will go is still left to be seen. Is CBDC a fad or will it thrive and bring our economies further digitally.

But in the meantime Jamaica “Wi inna wi ackee!” with JAM-DEX