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Jamaica’s central bank digital currency and the problems it hopes to solve

Jamaica’s new central bank digital currency, slated for launch early this year, aims to help address economic issues on the island nation.

The Central Bank of Jamacia recently announced that it would be launching its central bank digital currency (CBDC), dubbed the Jamaican Digital Exchange, or Jam-Dex, in the first quarter of 2022. According to the Jamaican government, the national digital currency will help to lower transaction costs while allowing the unbanked to access financial services.

It is estimated that over 17% of Jamaicans are unbanked, but it is feared that many more are underbanked. This is largely due to systemic financial sector impediments. High transaction costs, in particular, are a huge limitation. Consequently, many Jamaicans believe that banks are a preserve of the rich.

That said, internet penetration in Jamaica boasts impressively at over 55%, while mobile phone usage is at 100%. The Jamaican government is banking on these positive technological dynamics to catalyze the adoption of its national digital currency.

As things stand, the Jamaican banking sector is highly centralized. Two banks dominate over 60% of the nation’s entire banking sector. The situation has brought healthy competition and led to the compounding of retrogressive oligopoly issues such as high interest rates.

Jamaican banks have also hiked up transaction fees which “penalise depositors for having monies in the bank,” according to local Member of Parliament Fitz Jackson. The Jamaican government seeks to subvert these suppressive financial service trends by introducing the Jam-Dex digital currency. It will help devolve the country’s financial system away from the control of monopolistic banking giants.

Uptake in the next couple of years

Over 70% of the Jamaican population is expected to take up the new digital currency within the next five years. The country’s central bank, the Bank of Jamaica, is hoping to replace at least 5% of Jamaican dollars in circulation each year for the next couple of years.

The establishment has hailed Jam-Dex as a solution to greater transparency. All transactions done on the Jam-Dex network including government welfare payments will be traceable to enhance accountability.

The Jamaican central bank recently issued a total of around six million Jamaican dollars, or $44,000, to two major banks to carry out real-world testing of the Jam-Dex network before its official debut.

Customers looking to use Jam-Dex will be required to sign up for a digital wallet and make a deposit via an accredited Jamaican financial institution.

Problems facing the unbanked in Jamaica

Due to their avoidance of regulated financial institutions, many unbanked Jamaicans miss out on progressive socio-economic opportunities. Some government and nonprofit assistance programs, for example, make use of regulated financial institutions to distribute monetary aid. Because the unbanked lack bank accounts, many of them are left out.

Speaking to Cointelegraph, Daniel Polotsky, the founder of CoinFlip, the largest Bitcoin (BTC) ATM network in America, said:

“Users looking to open traditional bank accounts undergo tedious approval processes and usually expose themselves to potential overdraft fees or other hidden expenses that they often cannot afford to pay.” 

Another problem that the unbanked face is the reliance on exploitative credit sources. Many of them are likely to take out payday loans due to a lack of access to formal credit institutions. Payday loans are incredibly expensive to finance. 

1,000 Jamaican dollar banknote featuring former Prime Minister Michael Norman Manley. Source: Bank of Jamaica.

Many Jamaicans are hooked on such services because the loans are easy to access, especially during emergencies. This ultimately leads to a vicious borrowing cycle.

The lack of a credit history among the unbanked in Jamaica further contributes to their economic segregation. Credit history is typically needed by employers, insurance companies and landlords when making assistance and compensation considerations. Because unbanked individuals rarely have these records, they cannot get the help they need.

Many unbanked people also lack substantial savings and when they do, they keep the funds in unsafe places, usually at home. This makes the money more susceptible to risks such as theft.

The Jamaican CBDC aims to provide financial services to the unbanked, helping them overcome many of the aforementioned problems.

Greater inclusion with a CBDC

The Jamaican digital currency is set to have a disruptive effect on Jamaica’s financial sector, particularly for its unbanked citizens. 

The financial inclusion of unbanked Jamaicans calls for the implementation of a radical financial system that promotes inclusivity, and Jam-Dex has the necessary properties needed to achieve this.

Polotsky highlighted the importance of such CBDCs:

“Central Bank digital currencies like Jamaica’s are an important step in building widespread familiarity around digital currencies. They also allow underbanked and unbanked individuals the opportunity to digitally hold and send cash for a lower fee than traditional banks, which can be crucial. While they won’t replace cryptocurrencies, these currencies can seamlessly co-exist in our digital world.”

He also explained that the new Jamaican digital currency would help popularize the use of prime deflationary cryptocurrencies such as Bitcoin, which are typically used to hedge against inflation. 

Using the digital currency would enable relevant government agencies to monitor purchases of subsidized goods and detect pricing anomalies.

Setting consumer prices and countering price gouging

The rollout of the Jamaican digital currency will enable the government to counter price cartels, especially in instances where there is a need to regulate prices. Such scenarios usually occur when government subsidies cover certain products.

In recent years, Jamaican legislators have had to move swiftly to enact laws preventing the price cartels, especially in times of calamity. Price gouging in the nation is particularly rampant during the hurricane season when opportunistic traders hike the prices of building materials such as lumber, tarpaulin and zinc sheets.

During the onset of the COVID-19 pandemic, disinfectants, hand sanitizers and masks were targeted by Jamaican price-gouging cartels forcing the government to intervene. Fines of up to 2 million Jamaican dollars, or $13,066 at the time of writing, were imposed on retailers found to be price gouging.

Of course, verifying each reported price gouging case is a time-consuming process. The Jamaican digital currency will make it easier for the authorities to verify such reports by analyzing point-of-sale records on the blockchain.

Countering money laundering

Jamaica had a Basel AML Index score of 5.77 in 2021. The nation’s index has been on a downtrend since 2017. The current rating means that Jamaica is highly prone to money laundering and terrorist financing schemes. The composite index score considers numerous factors including the nation’s corruption levels, its financial standards, adherence to the rule of law and political disclosure.

In 2020, Jamaica was added to the European Union’s blacklisted countries after the EU found that Jamacia’s Anti-Money Laundering (AML) protocols were lacking.

The country was also included in the Financial Action Task Force gray list, a move that led to Jamaican merchants and clients being blocked from transacting on major international retail platforms.

The introduction of the Jamaican digital currency is expected to improve transaction transparency and help the nation overcome its current AML issues.

More effective monetary policies

The rollout of the Jamaican digital currency will enable the country’s central bank to track transactions with an aim to improve monetary policies.

The central bank, for example, would be able to establish overall credit scores compared to debt when formulating relevant regulatory rules.

James Bond Beach in Oracabessa. 

CBDC surveillance will also help the authorities crackdown on businesses involved in tax evasion schemes. This is thanks to Jam-Dex’s transaction traceability.

The Jamaican digital currency is bound to bring many benefits to the Caribbean island nation. Still, its adoption is likely to take a long time due to resistance by politicians and a population that is apprehensive of government surveillance.

A section of politicians has already accused the Jamaican government of bribery after it recently announced a 2,500 Jamaican dollars incentive to the first 100,000 Jam-Dex users.

Full adoption of the Jam-Dex digital currency is expected to take several years due to teething problems.

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Jamaican central bank to airdrop Jam-Dex CBDC to early adopters

“Jamaica Digital Exchange” — Jamaica’s soon-to-be-released CBDC — will see citizens with crypto wallets receive a $16 deposit to help spread awareness and usage.

The first 100,000 Jamaican citizens to use the country’s new central bank digital currency (CBDC) known as Jam-Dex, will be given a free $16 payment in the hopes of promoting widespread adoption. 

Jamaican prime minister Andrew Holness first announced the news in a Facebook post on Thursday. The post received a mixed response as some Facebook users praised Holness for “embracing a digital future”, while others expressed concern about the motivations of the Jamaican government, accusing Holness of trying to “bribe” citizens into the federal banking system.

According to the Jamaica Observer, approximately 17% of the Jamaican population is currently unbanked. While social media users postulate about government motives, the Observer points out that remaining unbanked is both costly and time-consuming for poorer Jamaicans. It is hoped that this new payment incentive, among others, will encourage low and middle-income citizens to join the national banking system.

The announcement comes as the Bank of Jamaica (BoJ) officially completed its 8-month long pilot program for Jam-Dex on Dec. 31 last year, and is expected to complete a national rollout as soon as next month. The BoJ further outlined that all Jamaicans with pre-existing bank accounts will be automatically eligible for Jam-Dex digital wallets.

Jamaican Finance Minister Nigel Clarke said in a speech to the country’s House of Representatives on March 9 that Jam-Dex must achieve widespread adoption by citizens and their businesses in order to be successful.

According to the report provided by the BoJ on Feb. 17, the new digital currency will be called Jamaica Digital Exchange or Jam-Dex for short, and comes with its own logo and the following tagline, “no cash, no problem”. The BoJ expects the currency to be launched as soon as next month.

The name “Jam-Dex”, was met with a great deal of criticism for both technical and aesthetic reasons. While the Jam-Dex is potentially making reference to the fact that currencies are “exchanged”, and that it is both “digital” and “Jamaican”, the terminology has created a good deal of confusion for many.

Users on Twitter were quick to point out the obvious misnomer in the currency’s namesake, as Jam-Dex is simply a digital currency whereas “DEX” in crypto parlance refers to a decentralized exchange, a place where cryptocurrencies are bought and sold.

Despite China being one of the first countries to announce the development of its CBDC, the “digital yuan”, countries in the Caribbean have quickly become leaders in the adoption and proliferation of CBDCs — with Eastern Caribbean Central Bank (ECCB) having now rolled out its own CBDC, DCash to eight different member countries.

Related: CBDCs will not impact private stablecoin market, says Tether CTO

The adoption of DCash however has been mired after a crash on Jan. 14 saw the central bank-backed digital currency go offline for nearly 2 months. It wasn’t until Mar. 9 that the ECCB announced that DCash was once again fully functional, stating the reason for the crash was an “expiring certificate” on the Hyperledger Fabric that hosts the DCash ledger.

Numerous other countries around the world are beginning to experiment with the implementation of CBDCs, with the Philippines announcing plans to launch Project CBDCPh as recently as Mar. 8. Iran, Kenya, and the European Union are also among the most recent countries to begin looking at introducing some form of CBDC.

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Crypto Twitter is not happy with the name and logo of Jamaica’s CBDC

The Jam-DEX is named after the Jamaican Digital Exchange following a competition. Its slogan is “no cash, no problem!”

The Bank of Jamaica revealed the name of its upcoming central bank digital currency (CBDC) after a design competition, only to receive backlash from the local crypto community. 

The central bank of Jamaica announced on Twitter that it had chosen the name “Jam-DEX” along with the tagline and logo for its upcoming CBDC, scheduled for late 2022. While the project is promising, its name could be easily misconstrued as a decentralized exchange (DEX), and its logo is “terrible,” according to the community’s response.

The name Jam-DEX is said to be taken from Jamaican Digital Exchange, with the slogan “no cash, no problem!” It was picked as the winner by the central bank following a competition. While the winner took 600,000 Jamaican dollars ($3,800) home, the community is somewhat left unsatisfied with the result.

In the cryptocurrency world, a “DEX” refers to a decentralized exchange. A decentralized exchange is an exchange where there is no centralized authority, but rather a network of peer-to-peer nodes. These nodes allow users to trade directly with one another without any intermediaries involved. In this model, the control of your funds lies in your hands, and you trade directly with another person.

The local crypto community was eager to see the rejected designs:

Some of the other competitors were not happy with the end result either:

Another user argued that judges had “out-dated” standards:

Others were simply concerned that the project would not be taken seriously due to its logo:

As reported by Cointelegraph, Jamaica revealed its plans to launch a CBDC in 2020 as an alternative to cryptocurrencies, making it one of the Caribbean countries to do so. The country’s central bank distinguished CBDCs and other cryptocurrencies, stating that cryptocurrencies do not entirely fulfill the requirements of money and are not always backed by a core authority.

Related: Central Bank of Kenya seeks public input on potential CBDC

Nigeria was one of the first countries in the world to launch a CBDC that is open to everyone. The United States is currently evaluating the prospects of a digital dollar. El Salvador, on the other hand, has taken a different approach. The Central American nation has embraced Bitcoin (BTC) fully instead of developing its own digital currency.

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70% of Jamaica population to adopt CBDC in 5 years, prime minister says

The Caribbean country expects a nationwide CBDC rollout by the end of the first quarter of 2022.

Central bank digital currency (CBDC) evolved into a hot topic in Jamaica when the country’s central bank successfully completed the first pilot test in early January.

Following the tests, the country's prime minister, Andrew Holness, has spoken confidently about CBDC adoption in the country.

Holness has predicted the majority of the Jamaican population would be quick to adopt the digital currency, with over 70% using the CBDC within five years. The Jamaican prime minister highlighted reduced banking costs and inclusivity of CBDC in a Bloomberg interview, adding that digital currency would ensure greater government accountability thanks to easier public resources tracking.

While admitting the initial challenges of a nationwide CBDC launch, which is aimed for the first quarter of 2022, Holness added that the government has to “figure out how to give people access to digital devices and the internet in general.”

The Bank of Jamaica, the country’s central bank, has become a pioneer in CBDC efforts with one of the first completed nationwide pilot projects in the world. After partnering with the Irish cryptography firm eCurrency Mint in March 2021, the central bank has conducted an eight-month-long pilot.

Related: UK Economic Affairs Committee unconvinced by prospect of retail CBDC

As Cointelegraph reported, the bank has minted 230 million Jamaican dollars (JMD) ($1.5 million) worth of the CBDC for issuance to deposit-taking institutions and authorized payment service providers. BoJ then issued 1 million JMD ($6,500) in CBDC to the staff at BoJ’s banking department and another 5 million JMD ($32,000) to the National Commercial Bank, a major financial institution in the country.

BoJ aims to add two new wallet providers for its CBDC, followed by a nationwide rollout in the first quarter of this year. The central bank also plans to focus on interoperability by testing transactions between customers of different wallet providers.

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Bank of Jamaica completes first CBDC pilot

The Bank of Jamaica initially partnered with the Irish cryptography firm eCurrency Mint for its CBDC project in March 2021.

The Bank of Jamaica (BoJ) has successfully completed its first central bank digital currency (CBDC), targeting a national rollout in the first quarter of 2022.

After proceeding with initial CBDC prototype testing in March 2021, Jamaica’s central bank finished an eight-month-long pilot last Friday, the Jamaica Information Service reported.

As part of the pilot, the BoJ minted 230 million Jamaican dollars ($1.5 million) worth of the CBDC for issuance to deposit-taking institutions and authorized payment service providers on Aug. 9, 2021.

The central bank then issued 1 million JMD ($6,500) worth of digital currency to the staff at BoJ’s banking department. On Oct. 29, the bank also issued 5 million JMD ($32,000) worth of CBDC to the National Commercial Bank (NCB), one of the ​​largest financial institutions in Jamaica.

According to the report, the NCB was the first wallet provider in Jamaica’s CBDC pilot, onboarding 57 customers including four small merchants and 53 consumers. Customers were able to conduct person-to-person, cash-in and cash-out transactions at an NCB-sponsored event in December 2021.

The BoJ now plans to proceed with a nationwide rollout in Q1 2022, expecting to add two new wallet providers. These providers have already been conducting virtual simulation testing and would be able to order CBDC from BoJ and then distribute it to their customers. The central bank also plans to focus on interoperability by testing transactions between customers of different wallet providers, the report notes.

Related: Mexico confirms plans to roll out CBDCs in 2024

As previously reported, the central bank of Jamaica selected the Irish cryptography security firm eCurrency Mint as the technology provider for its digital currency project in March 2021. The firm is known for being involved in the CBDC development in countries like Senegal. The BoJ previously invited technology providers to submit applications for its CBDC project in July 2020.

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Bank of Jamaica mints the first batch of national digital currency

The Bank of Jamaica plans to issue a total of $1.5 million of CBDC to institutions and authorized payment service providers as part of a pilot ending this December.

Jamaica is aggressively progressing with the country’s central bank digital currency (CBDC) as the Bank of Jamaica, or BOJ, has minted the country’s first batch of CBDC.

The BOJ officially announced that its dedicated CBDC division demonstrated the process of minting digital currency at a financial ceremony on Monday.

The issuing process for a digital version of the Jamaican dollar (JMD) was carried out with participation from Jamaica’s finance minister Nigel Clarke, BOJ governor Richard Byles and a group of senior BOJ executives, as well as a management team from Irish technology firm eCurrency Mint.

According to the announcement, the BOJ is planning to issue a total of 230 million JMD ($1.47 million) in the form of a CBDC to deposit-taking institutions and authorized payment service providers as part of a digital currency pilot ending this December.

Minister Clarke noted that the Jamaican government has seen rapid progress in the development of the country’s digital currency project, highlighting its crucial role in the creation of a digital economy in the island country. The official also said that local lawmakers are working on a legislative amendment to provide a legal basis for the Jamaican CBDC by the end of 2021.

According to BOJ governor Byles, Jamaica’s next CBDC adoption step would be to ensure widespread access and acceptance by bringing the CBDC to users.

The announcement notes that the Jamaican CBDC aims to enable a number of benefits to users, including “easier-to-access means of efficient and secured payments.” “For deposit-taking institutions and the BOJ itself, CBDC presents an opportunity to improve cash management processes and costs,” the central bank added.

Related: Venezuela to launch CBDC in October — And cut six zeros from its currency

The BOJ did not immediately respond to Cointelegraph’s request for comment.

The latest development comes in line with the BOJ’s CBDC plans as governor Byles announced that the initial roll-out of the Jamaican CBDC was scheduled for August. Controlled and issued by the BOJ, the country’s CBDC is designed to complement Jamaica’s banknotes, allowing financial institutions to issue the currency to individual and business account holders with each digital token pegged to the JMD on a 1:1 ratio.

The news comes amid an increasing number of countries aggressively piloting national CBDC initiatives, with Venezuela planning to launch a CBDC in October. According to a Friday analysis by JPMorgan strategist Josh Younger, retail CBDCs could risk “disintermediating commercial banks” and lead to a 20% or 30% loss of their funding base.

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Bank of Jamaica to begin digital currency pilot in August

The Bank of Jamaica is getting ready to begin testing its planned central bank digital currency in collaboration with financial institutions in the country.

Jamaica’s central bank will reportedly commence the initial roll-out of its central bank digital currency (CBDC) project in August.

According to a report by the Jamaica Observer on Wednesday, Bank of Jamaica (BOJ) Governor Richard Byles made this known during a Rotary Club event earlier in July.

Detailing plans to begin the pilot phase in August, Byles revealed that the BOJ was currently working on the technical aspects of the CBDC within a sandbox environment.

As previously reported by Cointelegraph, the BOJ chose Irish technology firm eCurrency Mint as the tech provider for its national digital currency project back in March. The Ireland-based cryptography security company was chosen from a list of solution providers that began applying for the project back in July 2020.

“As we work through the technical minting of the currency, we have to test it rigorously as a pilot that we’ll do in August,” Byles stated, adding:

“In September to December we’ll be recruiting more of the banks to come on board and then we’ll gradually expand the pilot out into a full-fledged launch of the CBDC.”

The BOJ governor also provided more details about the planned CBDC, stating that financial institutions will serve as intermediaries between the central bank and consumers — both retail and corporate.

With the CBDC designed to complement Jamaica’s banknotes, financial institutions will be able to issue the digital currency to individual and business account holders at a rate of one CBDC “coin” to one Jamaican dollar.

Byles also stated the BOJ’s plan to use the CBDC as a platform to provide financial services to the unbanked population. In this regard, the central bank governor called on the assistance of telecom firms in the country as well as their significant network of retail payment merchants.

Related: Jamaica's central bank taps Irish tech outfit for CBDC project

CBDC efforts have become a global endeavor, with central banks across the world establishing pilot studies or even launching sovereign digital currencies. A fellow Caribbean nation, the Bahamas, became one of the first countries to float a CBDC back in October 2020.

Elsewhere in the Caribbean, the Eastern Caribbean Currency Union recently launched its DCash digital currency in four or the currency union’s eight member states.

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UK Bitcoin wallet provider Caricoin to create NFT platform for reggae artists

Reggae and dancehall musicians in the Caribbean may soon have a nonfungible token platform to help gain greater control of their creative work.

Jamaican reggae artist Bay-C has partnered with Caricoin, a London-based Bitcoin (BTC) wallet company, to create a nonfungible token (NFT) platform for fellow performers in the Caribbean.

According to a report by the Jamaica Observer, the planned NFT platform will allow reggae and dancehall creatives in the Caribbean to gain more from their efforts in the music industry.

The planned NFT platform for musicians in the Caribbean is a further extension of the three-year partnership between Caricoin and the reggae star. Commenting on the plans for the NFT platform, Bay-C stated:

“Not everybody wants to understand how the blockchain technology works, some just want to get the content out; know that they have this NFT, so we're trying to make it as easy as possible for as many people in the Jamaican and Caribbean creative space.”

According to Bay-C, the planned NFT platform for Caribbean reggae stars will come online before the end of 2021. The reggae star said he is encouraging his colleagues to get involved with NFTs.

The upcoming reggae NFT platform is another example of Caricoin’s continued expansion in the Caribbean. The U.K. Bitcoin wallet company made Jamaica its home back in 2015 and announced plans for a crypto exchange back in 2016.

Bay-C has some previous experience with NFTs, releasing seven copies of one of his songs as digital tokens. The reggae star reportedly plans to expand his NFT foray by releasing digital collectibles as part of his second full album, King Bass.

Owners of the King Bass NFT collection will reportedly gain access to redeemable and unlockable content as well as coupons and playing cards.

Musicians and other celebrities continue to delve into NFTs, releasing digital collections leveraging on their personal or creative brand identities.

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Jamaica’s central bank taps Irish tech outfit for CBDC project

The Bank of Jamaica has partnered with an Ireland-based tech firm for its central bank digital currency project scheduled to begin in May.

Jamaica is the latest country making concrete efforts towards issuing its own sovereign digital currency.

According to a press release by the Bank of Jamaica on Tuesday, eCurrency Mint, a cryptography security company specializing in central bank digital currency issuance has been selected as the technology provider for the sovereign digital currency project.

As previously reported by Cointelegraph, Jamaica’s central bank invited technology solution providers to submit applications for its CBDC project back in July 2020. At the time, the BoJ clarified that its planned sovereign digital currency would not be based on crypto technology.

Based in Ireland, eCurrency Mint is reportedly working with central banks and other international finance organizations to develop protocols for CBDC design and implementation.

As part of the announcement, Jamaica’s central bank revealed that the CBDC pilot will commence in May under the aegis of the BoJ’s Fintech Regulatory Sandbox. ECurrency Mint will support the central bank in testing protocols during the pilot stage scheduled to be completed by December.

The Ireland-based tech outfit will also serve as Jamaica’s CBDC provider when the full national roll-out commences in early 2022. According to previous statements by the BoJ, the CBDC will be available for both individuals and businesses as a payment means similar to cash.

Like many countries in the Caribbean, Jamaica has somewhat liberal crypto and blockchain laws with regulated entities like the nation’s Stock Exchange participating in cryptocurrency trading.

The BoJ is one of the Caribbean central banks currently working on CBDCs. Back in October 2020, The Bahamas became one of the first countries to officially launch a sovereign digital currency.

Regional CBDC efforts are also ongoing with the Eastern Caribbean Currency Union working on a blockchain-based sovereign digital currency project.

Outside the Caribbean, Asia’s largest economies are accelerating their CBDC development projects. Multiple banks in China have issued digital wallets for the country’s digital currency electronic payment project.

In Japan, the central bank is leading a public-private partnership to examine proof-of-concept protocols for a possible digital yen. Earlier in March, Kuroda Haruhiko, governor of the Bank of Japan, said that the country must work out modalities for issuing a CBDC.

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