On the cusp of the pilot phase of the Central Bank Digital Currency (CBDC), the Bank of Jamaica is forecasting its new digital currency “will be the preferred means of payment…in ten years from roll-out if not before”. Natalie Haynes, deputy governor of the Bank of Jamaica, made the disclosure in answers to questions from the Jamaica Observer on the digital currency.
Haynes, who oversees the BOJ’s banking, currency operations and financial markets infrastructure, said, however, that the take-up of the digital currency will be dependent on demand, acceptance and usage by all Jamaicans.
Despite the ten-year timeline for the digital currency to become the dominant means to settle transactions, Haynes, in a release to the Business Observer, added “in five years the BOJ foresees a robust digital financial system underpinned by the safe and secure digital Jamaican dollar that will be more widely acceptable for use by all Jamaicans”.
The CBDC is expected to be rolled out early next year. This will follow a pilot project in which the new currency will first be tested by the National Commercial Bank (NCB) starting in August, before other deposit-taking institutions (DTIs) are added later. The pilot is expected to end in December.
In countries like China, digital currencies are widely used. Consumers with mobile wallets attached to their phones scan barcodes to make payments. It is quicker than using cash and requires no one to make change after a purchase is made. It is not clear by how much the digital currency will reduce transaction costs, but the BOJ said it “will not be a cost to consumers”.
For its part, the central bank pointed out that the cost to it for issuing the CBDC “will be significantly below the cost to issue physical banknotes and coins”, though it did not quantify the cost difference. It said, however, “there will be significant long-term cost savings as there will be no ‘wear and tear’ on digital currency, and it cannot get ‘lost in circulation’, so there will never be a need for replacement”.
Currently, debit and credit card transactions are almost ten times larger than cash transactions. Figures from the Bank of Jamaica show cash transactions in 2020 totalled JM$156.9 billion. At the same time, debit and credit card transactions combined were valued at more than JM$1.5 trillion.
Globally, large economies have seen a consistent decline in notes and coins issued over the past few years. This has been accelerated by the recent novel coronavirus pandemic, which is highlighted in studies such as The 2020 McKinsey Global Payments Report.
Haynes said the central bank is motivated to introduce the CBDC to support Jamaica’s digital transformation by faciliting access for each citizen to quick, safe and reliable digital retail payment mechanisms. Irish-based eCurrency Mint will be the technology provider for the pilot and the provider when the national CBDC roll-out begins in early 2022.