BOJ Prepares for Central Bank Digital Currency
- After quietly exploring the viability of a central bank digital currency (CBDC) for some time, the Bank of Jamaica (BOJ) took the decision in May 2020, as a part of its ongoing retail payments reform, to venture into this digital innovation that is fast becoming a feature of global central banks.
- CBDC is a digital form of central bank issued currency and is therefore legal tender. It is not to be confused with cryptocurrency, which is privately issued and not backed by a central authority. CBDC is fully backed by the Central Bank, the sole issuer.
- The issuance and distribution of the CBDC will be fully integrated with the Bank’s financial market infrastructure, the JamClear® Real Time Gross Settlement System (RTGS). The approach will not compete with deposits in deposit taking institutions, but rather it will leverage the existing financial and telecommunications infrastructures of the country.
- Individual consumers and businesses will benefit from the sheer convenience, from a broadened and more modern payment system, of a digital alternative to cash that is seamless, secure, and simple to use. They will also benefit from greater financial inclusion, as persons who do not currently have regular bank accounts will be able to access CBDC accounts in a way that will be easier and simpler than accessing regular bank accounts.
- The financial system will benefit from increases in systemic efficiency and significant reductions in costs for cash distribution and storage. It will also allow for an increase in the menu items of services available to customers and create an opportunity to innovate unique products and systems complementary to CBDC use.