Jamaica has become the first country to offer a CBDC legal tender in an attempt to provide a difference in a cash-rich environment — and help the unbanked. Jamaica’s parliament passed legislation rendering the Bank of Jamaica’s currency (BOJ) CBDC a legal tender when Jamaicans seek an alternative to their nation’s cash-based economy.
Jamaica makes Jam-Dex a legal tender
According to news reports, the Jamaican senate has given its central bank permission to launch the CBDC, dubbed the Jamaica Digital Exchange by locals, or Jam-Dex. Later this month, Bank of Jamaica Governor Richard Byles announced that the Jam-Dex would go live for domestic use. At the time of writing, nothing much is known about the CBDC use by an international clientele.
Furthermore, the recent legislation broadens the definition of legal tender to include virtual tokens, as well as physical notes and coins. Moreover, instead of using actual currency, the digital Jamaican dollar is a more secure and easier-to-use alternative to actual notes and coins that may be used without having a bank account.
Since August of last year, the Jam-Dex has been in a pilot testing phase. Cryptopolitan said earlier this year that it would be launched in the first quarter, but delays have caused it to miss its initial deadline.
The Bank of Jamaica included eCurrency Mint Inc. in its Fintech Regulatory Sandbox, a technology solutions provider. The trial, which lasted roughly eight months, came to an end on 31 December 2021. The CBDC pilot involved only wallet providers.
During the pilot phase, the rollout was accessible to financial institutions that the central bank’s Sandbox had already authorized for new technology-driven financial solutions. NCB was the only payment provider interested in participating in BOJ Testing.
They had to test the range of services provided using CBDC because of their extensive experience in the Sandbox. NCB tried out the system with the help of Lynk’s payment platform.
The decentralized community has welcomed the government’s decision stating that the move could influence other nations to take the same path. Jonathan Dharmapalan, the CEO of eCurrency, a CBDC technology provider, confirmed the decision with support. He said that the lawmakers unanimously advanced a digital dollar forward in Jamaica. Citizens can now utilize Jam-Dex to settle any debt in Jamaica owing to this change. He also added that it is also a medium of exchange and a medium of account.
He stressed the need for countries to recognize that their currencies may be provided in electronic form. He added that digital currency allows you to trade from any place. This is because you don’t have to be in the exact location simultaneously to complete a transaction. He terms the CBDC as an extremely powerful financial instrument.
Legislators in Jamaica have all now unanimously moved a digital dollar forward in Jamaica. You can use this to settle any debt in Jamaica. It is the medium of exchange. It is the medium of account. What is primarily important is that countries start to recognize that their money can come in digital form. Because it’s digital, you don’t have to be in the same place at the same time to execute a transaction… It’s a really, really powerful tool.
Jonathan Dharmapalan, CEO of eCurrency.
According to the Jamaica Observer, the JMMB Group, a financial services firm, is looking to release several new products, including point-of-sale, e-commerce, and new payment systems, in order to help consumers use the Jam-Dex.
According to a news source, the CBDC is also being boosted by the National Commercial Bank (NCB) through its Lynk wallet. The CBDC is anticipated to significantly decrease the difficulties posed by Jamaica’s mostly cash-driven economy. A digital Jamaican dollar provides a more secure and efficient way to pay than physical money and coins.
CBDCs create a global drive within nations
However, while Jamaica is the first country to make CBDCs comparable to cash, it isn’t the only government interested in the technology. Brazil, Nigeria, and Haiti are among the countries looking into establishing or expanding CBDCs. In 2020, the Central Bank of The Bahamas’ Sand Dollar became the world’s first CBDC.
According to the CBDC tracker maintained by The Atlantic Council, 105 countries, or about 95 percent of global GDP, are researching or developing a CBDC. It also says that ten nations have already implemented a CBDC, including Nigeria, the Bahamas with its “Sand Dollar,” and several Caribbean island nations. However, Jamaica is the first country in the world to legalize it as a legal tender.
The pace set by the country follows in the footsteps of El Salvador. The Latin American country was the first to legalize Bitcoin as a legal tender. The Bank for International Settlements claims in a May research that emerging markets are studying CBDCs for the same reasons and objectives as developed nations.
Providing a cash-like digital means of payment, in light of reduced cash usage and an increase in private digital payment services, is the most common consideration. Other significant considerations include strengthening competition among payments service providers (PSPs), increasing efficiency, and reducing the costs of financial services.
Bank for International Settlements.
China’s digital yuan, e-CNY, or DCEP (digital currency/electronic payment) trials are planned to continue until 2023. In April, six cities in Zhejiang province were added to the test program, including Tianjin, Chongqing, Guangzhou, Fuzhou, and Xiamen.
The United States is almost the last country to adopt a national cryptocurrency, with federal lawmakers and central bankers resisting any progress in that direction. Some believe that a centralized bank’s digital dollar would give the Federal Reserve more authoritarian control and monitoring over people’s finances.