The Eastern Caribbean has created its own form of digital currency with the goal of streamlining transactions and providing service to people who do not have bank accounts.
The Central Bank of the Eastern Caribbean said its “DCash” is the first blockchain-based currency of its kind to be launched by any of the world’s monetary unions, although some individual countries already have systems in place. similar.
The digital currency was available starting Wednesday in four island nations according to a one-year pilot program: Santa Lucia, Granada, Antigua and Barbuda, and San Cristóbal and Neus.
“It’s a milestone in the history of monetary instruments,” Bitt CEO Brian Popelka said during an online press conference.
DCash was created by Barbados-based technology financial company Bitt in partnership with the central bank. Unlike digital currencies, DCash is issued by an official central bank and has a fixed value indexed to the current Eastern Caribbean dollar that is used in much of the region.
The system allows users, even those who do not have a bank account but have a smartphone, to download an application and make payments using a QR code. Those who do not have a bank account can go to a previously authorized non-bank financial agent or institution to have their information verified in order to approve a “DCash” wallet. Subsequently, the person would go to a supermarket or some other store to deposit cash in their wallet, Bitt spokesman Chris Burnett told AP.
Also, there is a limit to the amount of money that can be sent through DCash. At the moment there are no plans to integrate credit cards and no interest is applied to the digital currency.
Although many in the eastern Caribbean celebrated the historic measure, some experts are concerned that digital currency issued by small countries could end up being used in illicit activities, such as terrorist financing and money laundering, noted Eswar Prasad, professor of business policy at Cornell University.
“This skepticism is waning as more central banks become involved and as central banks around the world face the inevitable reduction in the use of cash,” he pointed out.
He stressed that the Bahamas last year became the first country to launch its digital currency nationwide, and that the Marshall Islands are considering having their own digital currency. For smaller countries “there is more at stake” in part because many people still do not have a bank account, he added.
“For this reason it seems to me that small countries are being more aggressive in this regard, simply because they should be,” Prasad noted.
Authorities said that by September at the latest, digital currency will be available in Anguilla, Dominica, Montserrat and Saint Vincent and the Grenadines, which are part of the eight island economies that make up the Central Bank of the Eastern Caribbean.
The project aims to reduce by 50% in cash use by 2025, said Sharmyn Powell, chair of the bank’s financial technology working group.
“It’s safer, faster and cheaper,” Powell said.
Central Bank Governor Timothy NJ Antoine said he expects farmers, fishermen, small business owners, single mothers and people without bank accounts to use digital currency.
“Payments are still too slow and too expensive,” Antoine noted referring to the current system. “We’ve listened to them and fulfilled them.”
According to Antoine, it is more difficult to steal digital money and it is a secure way to make payments and avoid contact during the pandemic.
An Eastern Caribbean dollar is currently equivalent to 37 US cents. All notes in the Eastern Caribbean, of any denomination, have the image of Queen Elizabeth II of England as head of the Commonwealth of Nations.
The project takes place more than two months after the European Central Bank, the Bank of Japan, the Bank of Canada, the Bank of England, the Riksbank of Sweden and the Swiss National Bank set up a group to study the possibility of issue digital coins.
The Swedish central bank has already commissioned a pilot program. For its part, China put a digital currency into circulation in four cities in April 2020 as part of a pilot program that has since been expanded to more than 20 cities.
However, it remains to be seen whether the central bank’s digital currency is the future, noted Lee Rainers, a professor of law and financial technology policy at Duke University.
“I approach the issue with some skepticism because this technology has been around for over 10 years, but it has not taken off as a widespread means of exchange,” he pointed out.