The Eastern Caribbean has created its own form of digital currency with the aim of streamlining transactions and serving people without bank accounts.
The Eastern Caribbean Central Bank said its “DCash” is the first blockchain-based coin of its kind to be launched by one of the global currency unions, although some individual countries already have similar systems.
The digital currency became available on Wednesday in four island states under a one-year pilot program: Saint Lucia, Grenada, Antigua and Barbuda, and Saint Kitts and Nevis.
“It is a milestone in the history of monetary instruments,” said Brian Popelka, CEO of Bitt, at an online press conference.
DCash was founded by Barbados-based financial technology company Bitt in partnership with the central bank. Unlike cryptocurrencies, DCash is issued by an official central bank and has a fixed value indexed based on the current East Caribbean dollar used in much of the region.
The system allows users, even those who do not have a bank account but have a smartphone, download an application and make payments with a QR code. Those without a bank account can go to a previously authorized agent or non-bank financial institution to have their information verified to approve a “DCash” wallet. Later, the person would go to a grocery store or other retailer to deposit cash in their wallet, Bitt spokesman Chris Burnett explained to The Associated Press.
There is also 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.
While many in the Eastern Caribbean have welcomed the milestone, some experts are concerned that digital currencies issued by small countries could eventually be used for illegal activities, such as terrorist financing and money laundering, said Eswar Prasad, trade policy professor. Cornell University.
“That skepticism is diminishing as more central banks become involved and as central banks around the world face the inevitable decline in the use of cash,” he said.
He underlined that the Bahamas was the first country to launch its digital currency domestically last year and that the Marshall Islands are considering having their own cryptocurrency. For smaller countries, “the stakes are higher,” in part because many people still don’t have a bank account, he added.
“For this reason, it seems to me that small countries are more aggressive in this regard, simply because they have to be,” said Prasad.
Authorities said the digital currency will be available by September 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 cash use by 50% by 2025, said Sharmyn Powell, chairman of the bank’s fintech task force.
“It’s safer, faster and cheaper,” Powell said.
Central bank governor Timothy NJ Antoine said he is considering the use of digital currency by farmers, fishermen, small business owners, single mothers and those without bank accounts.
“Payments are still too slow and expensive,” said Antoine of the current system. “We have listened to them and we have fulfilled them.”
According to Antoine, it is more difficult to steal digital money and is a safe way to make payments and avoid contact during the pandemic.
One East Caribbean dollar currently equals 37 cents. All East Caribbean banknotes, of whatever denomination, bear 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 promote the possibility of issuing coins. to study. .
The Swedish central bank has already commissioned a pilot program. China, for its part, launched a digital currency in four cities in April 2020 as part of a pilot program that has since expanded to more than 20 cities.
However, it remains to be seen whether the central bank’s digital currency is the future, said Lee Rainers, a professor of fintech law and policy at Duke University.
“I approach the issue with some skepticism, as this technology has been around for over 10 years, but it has not taken off as a common medium of exchange,” he said.