KINGSTON, January 1, 2022 - The Bank of Jamaica (BOJ)says it is pleased to announce that it has successfully completed the Central Bank Digital Currency (CBDC) pilot.
In March 2021, BOJ announced that it was testing a prototype central bank digital currency with vendor eCurrency Mint Inc. in BOJ’s Fintech Regulatory Sandbox. This was followed in May 2021 by the commencement of an 8-month long pilot which ends today, 31 December 2021.
The scope of the CBDC pilot was limited to wallet providers who indicated their readiness to participate within the scheduled timeframe. National Commercial Bank (NCB) based on the extent of their experience in the Sandbox came onboard with BOJ to test the range of services to be offered using the CBDC solution.
The digital currency will be stored and exchanged by customers in a digital wallet account, which can be accessed via mobile phone.
Financial inclusion is the stated primary objective of introducing the digital currency, followed by providing an efficient and easy-to-access means of digital payment. The technology provider is Irish fintech eCurrency Mint.
Success of the pilot project was dependent on whether a central bank digital currency along with the attendant technology solution could be successfully implemented in Jamaica. Several activities were targeted and completed during the pilot.
Activities Targeted and Completed During the Pilot
1. CBDC Minted
On 9 August 2021, BOJ, during its inaugural minting ceremony, minted $230 million worth of digital currency to be issued to deposit taking institutions and authorized payment service providers.
2. CBDC Issued to Wallet Providers
a. On 10 August 2021, BOJ issued to Bank of Jamaica’s Banking Department $1 million worth of CBDC to be distributed to staff.
b. On the 29 October 2021, the Bank issued $5 million worth of CBDC to NCB, marking this the first issuance of CBDC to a deposit taking institution.
3. CBDC Distributed to Retail Customers
NCB the first wallet provider in the pilot, successfully onboarded 57 customers which included 4 small merchants and 53 consumers. These customers conducted person-to person, cash-in and cash-out transactions through 37 accounts and completed transactions with small merchants (local craft jewellers, footwear designers and fashion and garment boutiques) through an NCB-sponsored event, “Market on the Lawn” held earlier in December 2021.
National Roll-Out Q1 2022
The National Roll-Out of the central bank digital currency (CBDC) is scheduled for 1st quarter 2022 whereby:
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.
One of the main CBDC design issues all central banks face is to decide between a directly issued digital currency or a two-tiered system. If a central bank chooses the former, it would have to carry out Know Your Customer (KYC) procedures to verify the identities of its customers. Hence Jamaica and most other central banks tend to opt for a two-tier approach.
The BoJ has also previously addressed concerns about the data privacy and money laundering risks associated with a CBDC.
During an interview with Jamaica Information Service, Mario Griffiths, Director of the BOJ’s Payment System Policy Department, stated that third parties will be responsible for anti-money laundering compliance.
“In terms of anti-money laundering, we have ensured that there is intermediation where the central bank will issue CBDC to the financial institutions as well as authorised payment service providers that are regulated by the Bank of Jamaica,” said Griffiths.