BOJ urges DTIS, merchants to accept CBDC
GOVERNOR of the Bank of Jamaica (BOJ) Richard Byles is encouraging deposit-taking institutions (DTIS) and merchants to accept the central bank digital currency (CBDC) which is projected to be fully implemented in early 2022.
“Getting consumers like, for example, a lot of these Government beneficiaries, people who use the toll roads, remittances…to accept CBDC is only one half of the equation,” he said during the Jamaica Bankers Association and Jamaica Institute of Financial Services 10th annual Anti-money Laundering/counterFinancing of Terrorism virtual conference held on Wednesday.
“If you have CBDC in your wallet but can’t spend it because the merchants have not been recruited to accept it, then we have a problem,” he continued.
CBDC is a digital form of central bank-issued currency and is therefore legal tender which can be exchanged dollar for dollar with physical cash.
Consequently, Byles said the DTIS play a special role in the success of CBDC, and they should be proactive in encouraging their merchant customers to accept the digital currency by having a wallet with financial institutions.
“…And that’s such a simple process, it’s just a telephone to telephone transaction so all the merchant need is to have a telephone that a consumer can make transactions to and it goes straight into their wallet at their DTI,” Byles said.
“BOJ’S internal IT people have developed a wallet which we have tested and which works fine and is integrated into our banking system and allows our staff to use CBDC, and it will become interoperable with other wallets in the system shortly,” he said.
The governor, however, acknowledged that some DTIS may face difficulties in developing a digital wallet framework.
“Developing a wallet is, I’m told, a fairly expensive operation and that has made some DTIS reconsider how and when they’re going to develop this wallet. But it’s inevitable, we know that at one stage or another we’re going to have a wallet because that’s where all transactions are going, it’s heading in that direction where your customers are going to want to have a wallet to house CBDC as well as other products,” he argued.
“The fact that we could do so with internal IT skills I think says that [DTIS] too can do it and you can avoid that kind of heavy charge that is being requested,” he contended.
Byles further noted that to fully adopt the digital currency, amendments were made to the Bank of Jamaica Act.
“When we look to the BOJ Act all references to legal tender are referred to as notes and coins and so we had to update it for the 21st century by saying “and electronic currency”, and so we’re quite official and can issue CBDC legally,” he said.
The BOJ minted the first batch of CBDC in August totalling $230 million, which will be issued to DTIS and authorised payment service providers. The National Commercial Bank has been engaged as the initial wallet provider under the CBDC pilot exercise and is expected to begin a gradual roll out.
According to him, BOJ will assess the pilot stage of CBDC which ends in December, as well as shortly roll-out a public education campaign to heighten awareness of the digital currency.
He added, “I must say, I find this to be a very exciting programme and we really look forward to [the public’s] continued support with it and I can’t stress how important it is for your proactive support to make this concept of a central bank digital currency work. It’s for the benefit of the country, the DTIS, your business customers, and your individual retail customers”.