Jun 7, 2022 - Economy & Business

Jamaica's central bank steps toward CBDC

Illustration of a piggy bank, but the dots on its nose have been replaced with binary code 01.
Illustration: Maura Losch/Axios

The central bank of Jamaica is one step closer to issuing digital currency backed by the state to be used as local legal tender.

Why it matters: Governments are pressing forward on so-called central-bank digital currencies, eager to provide faster more efficient payment options while preserving monetary and financial stability.

  • There are 105 countries, representing over 95% of global GDP, exploring CBDC, according to the Atlantic Council's CBDC tracker. That's up from only 35 countries in May 2020.

Flashback: After Jamaica's central bank (BOJ) completed its 2021 sandbox project with Dublin-based technology firm eCurrency Mint, it named its CBDC the Jamaican Digital Exchange, or JAM-DEX .

  • And the BOJ recently announced a phased launch of the token so that users can transact using the CBDC via their digital wallets.

Driving the news: Jamaica's Senate on June 3 passed proposed amendments to the BOJ Act. Those amendments authorize the central bank to be the sole authority to issue CBDC, and for CBDC to become legal tender, Natalie Haynes, deputy governor of the central bank, tells Axios.

  • "However, before those amendments become law, there are still some steps to be taken," Haynes said.
  • "The publication of the Act in the Gazette will signal the date when the Act comes into effect. At the date of promulgation, the Bank will be so authorized to issue CBDC, and CBDC will then be regarded as legal tender."

JAM-DEX does not use blockchain technology.

  • That's not because they have any major concerns with the tech usually associated with CBDCs, according to BOJ, but because the tech requires seamless integration with the country's payment infrastructures — a challenge for many.
  • At the same time the use of CBDC stands to raise "systemic efficiency" and lower physical cash distribution and storage costs, the central bank said in their CBDC primer.

Yes, but: CBDCs still have a long way to go before they're useful for regular people. Recall our brief note on the Bahamian CBDC in our state-backed digital money primer.

The bottom line: The great race toward CBDCs continues.

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