The BOJ’s digital central bank money will provide a more efficient method of payment, replenish cash and serve people without a bank account
The Bank of Jamaica (BOJ) plans to test its digital central bank money (CBDC) next month, according to a yesterday’s article in the Jamaica Observer.
While the central bank continues to issue banknotes and coins, central bank digital money complements other legal tender and is more efficient. It could also provide more security, since in the case of a stolen phone without a code, access to the CBDC is not possible.
Richard Byles, President of the Bank of Jamaica, said: “As an immediate and very efficient payment solution, digital central bank money leaves cash out. It will reduce the cost of producing, transporting and securing cash, which amounts to billions of US dollars every year. In addition, sellers no longer have to look for change, since payment can be made to the penny.“
The launch of the CBDC was originally scheduled for May, but the pilot project was postponed to August. From September, CBDC will be sold to authorized payment service providers, licensed commercial banks and deposit institutions.
„The financial institutions will coin CBDC and sell it to companies and individuals at a rate of 1:1 (USD/CBDCByles continued. „However, financial institutions hold the CBDC in digital wallet accounts with their respective banks, which customers can access to make purchases or process mobile-to-mobile payments.“
The President believes that Jamaica needs a more robust telecommunications infrastructure in order to achieve broad acceptance of CBDC among merchants and consumers.
Many people in the country do not have bank details. Digital central bank money would allow them easier access to financial services without the need for Know Your customer (KYC) verification. However, Byles stressed that this would require the help of telecommunications companies and financial institutions and concluded by saying:
„If you’re walking around with your CBDC and no one wants to accept it, then we have a problem. Commercial banks will therefore have to work hard to promote, introduce and recommend the system to their customers. In addition, the government must support and use CBDCs as much as possible, whether for PATH, pension or other payments.“