Just three countries have so far introduced CBDCs, according to the IMF, and two of them are already having serious issues.
The roll-out of central bank digital currencies (CBDCs), while still in its early stages, is not going as smoothly as the central banking community may have hoped. The latest central bank to admit to serious difficulties is the Bank of Jamaica (BOJ) whose governor Richard Byles has acknowledged that the rollout of the country’s CBDC, the Jam-Dex, has been a lot slower than originally anticipated. In fact, the total amount of Jam-Dex in circulation has remained stuck at just 230 million Jamaican dollars (USD 1.47 million) since the first — and so far only — batch of the digital currency was “minted” 19 months ago.
The Jam-Dex is one of just three fully-launched retail CBDCs in the world, according to the IMF, alongside the Bahamian sand dollar and Nigeria’s eNaira.
“Being one of the first in the world has its unique challenges,” Byles said at the BOJ’s quarterly monetary policy report press conference last Wednesday. “What we are finding in the roll-out is that as we address an issue and move ahead, another one pops up. I guess that’s what you get for being amongst the first; you don’t have a road map set out by others, but we are determined.”
Jamaica’s “Rapid” Transition Toward a “Fully Digital Society”
Contrast this message with the much more confident tone struck by Jamaica’s Prime Minister Andrew Holness in a speech on Jamaica’s “rapid” transition toward a “fully digital society” last July:
In the coming weeks and days I’ll be making certain announcements regarding the acceleration of Jamaica’s intention to become a fully digital society. We are well on our way to this. We have established the national identification system, we have put in place our digital currency, we have given directions to our ministries to digitalise their operations. Most of our ministries are now moving from paper-based systems to digital systems. Our military is transitioning. Society is moving very quickly to become digital.
Our banking consumers are seeing it as well because the banks are moving very rapidly to digital. You have something now called artificial intelligence. Very soon this position of a human being exchanging cash, that is going to soon disappear from the banking system very soon and you are going to have to interface with machines. I don’t want it to be scary but it is a thought that we all have to embrace.
Many Jamaicans, it seems, are not ready to do that. Shortly after making his speech, Holness had to row back his comments following a public backlash over the idea of cash being removed from the system, as happened in Nigeria just over a year ago (more on that later). Holness labelled any suggestions as “irrational” and the result of widespread disinformation, arguing that the government has just invested billions of Jamaican dollars in upgrading Jamaica’s cash notes. Which seems like a fair point — until you hear what the central bank governor just said:
“When you look at all of the cash problems and complaints, fundamentally, digitising is the only solution. All those issues go away with digital transactions, credit cards, debit cards, wallets, CBDC, that’s what we want in this country. The use of cash is really quite high and creates problems that are intractable.
According to a report on Jamaica Live News, most Jamaicans do not want a central bank digital currency anyway:
“The majority of the Jamaican public argue that do not agree to a digital currency and feel they are been bamboozled into it. Most Jamaicans use cash on a daily basis and many do not have a bank account. The consensus amongst Jamaicans, are, crime is a bigger and more urgent problem and they do not understand why the government is making the digital currency a priority.”
Also, Holness’ claim that banks are rushing to embrace the CDBC is plain wrong. As Jamaican Observer reports, just one national lender, National Commercial Bank of Jamaica (NCB), has so far agreed to participate in the BOJ’s pilot test of digital currency through its NCB. It is the only bank currently able to facilitate Jam-Dex transactions. That’s after 19 months of Jam-Dex operations:
JN Bank was expected to follow suit shortly after but is yet to launch its own
JN Pay digital wallet.Two other banks, JMMB Bank and First Global Bank also stated their intention to incorporate CBDC-related services in their businesses but have not stated a timeline for roll-out.
“The take-up is still lower than what we desire at this time. The main reason is merchant adoption. Most of the larger merchants would prefer if Jam-Dex payments go through a single point-of-sale machine, so what we are doing is testing a solution in the sandbox for the use of a dynamic QR code.
“It’s really about the customer experience, they don’t want another device, they want the same machine that takes the debit and credit card,” deputy governor, banking, currency operations and payment system at the BOJ, Natalie Haynes, said…
In the meantime, she said that two more banks are expected to join NCB in the acceptance of Jam-Dex transactions by the middle of this year.
At last count, the NCB platform was said to have over 200,000 ‘Lynkies’, or users, who can conduct peer-to-peer transfers and digital payments at over 4,000 micro merchants, predominantly in the food and beverage, fashion, and consumer goods categories.
This is barely an improvement on figures cited by a Financial Times article from July 2023, according to which the total number of Jam-Dex customers as of February 2023 — over a year ago — was 190,000. Total transactions for 2022 were valued at $357mn, “less than 0.01 per cent of Jamaica’s $4.7tn electronic retail transactions for that year and 0.1 per cent of currency in circulation.” As the article notes, total transactions would have been higher if the service had been available throughout 2022, but it is still “a drop in the Caribbean sea.”
In a bid to boost take-up, the finance ministry announced two incentive programmes — the “Small/Micro Merchant Incentive Program”, which proposed to reward 10,000 food stores, gas stations and salons with a J$25,000 ($164) deposit, and the “Wallet-holder Individual Loyalty Program”, which provides regular users with loyalty points that can be redeemed for cashback — but to little apparent avail…
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Nick Corbishley 