Casey Wagner

<div id="highlights-block_62a0fc2266809" class="highlights">
 <ul>
 <li>Jamaica’s central bank officially recognizes a digital Jamaican dollar as legal tender</li>
 <li>It is the first time in history a country has passed this type of legislation</li>
 </ul>
 
</div>



In a move to offer an alternative in a cash-heavy economy — and buttress the finances of the unbanked — Jamaica has become the first country to render a CBDC legal tender.



Jamaica’s senate authorized the country’s national bank to issue its CBDC (central bank digital currency), the Jamaica Digital Exchange, or Jam-Dex, via an amendment. The fresh legislation expands the definition of legal tender to include virtual tokens, as well as physical notes and coins.&nbsp;



Jam-Dex, which has been in a pilot since 2021, will launch officially for domestic use later this month, Central Bank of Jamaica Governor Richard Byles told Blockworks.



The CBDC is expected to significantly limit the challenges associated with Jamaica’s primarily cash-driven economy. A digital Jamaican dollar offers a more secure, convenient alternative to physical notes and coins, Byles said — and can be used without a bank account.&nbsp;



“Legislators in Jamaica have all now unanimously moved a digital dollar forward in Jamaica,” said Jonathan Dharmapalan, CEO of eCurrency, which provides technology for central banks to issue and distribute CBDCs. “You can use this to settle any debt in Jamaica. It is the medium of exchange. It is the medium of account.”&nbsp;



The success of the pilot, Dharmapalan said, proved Jam-Dex’s underlying technology and infrastructure works, but seeing citizens use the currency in the real world in the coming weeks and months will demonstrate the true value of CBDCs.



“What is primarily important is that countries start to recognize that their money can come in digital form,” he said. “Because it&#8217;s digital, you don&#8217;t have to be in the same place at the same time to execute a transaction…It&#8217;s a really, really powerful tool.”



While Jamaica is the first country to make CBDCs akin to cash, it is <a href="https://cms.blockworks.co/why-emerging-markets-are-leading-the-charge-on-cbdcs/" target="_blank" rel="noreferrer noopener">not the only government</a> looking into the technology. Brazil, Nigeria and Haiti are among the jurisdictions exploring the establishment or expansion of CBDCs. The Central Bank of the Bahamas’ Sand Dollar became the world’s first CBDC in 2020.



Emerging markets looking into CBDCs have similar goals and motivations, the Bank for International Settlements said in a May <a href="https://www.bis.org/publ/bppdf/bispap123_a_rh.pdf" target="_blank" rel="noreferrer noopener">report</a>.



“Providing a cash-like digital means of payment, in light of reduced cash usage and an increase in private digital payment services, is the most common consideration,” the report said. “Other significant considerations include strengthening competition among payments service providers (PSPs), increasing efficiency and reducing the costs of financial services.”



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In Historic Move, Jamaica Makes CBDC Akin to Cash

<div id="highlights-block_6279894780c60" class="highlights">
 <ul>
 <li>Jamaica first announced the Jam-Dex pilot program in 2021</li>
 <li>The Caribbean country is using a CBDC model that the Federal Reserve has expressed interest in</li>
 </ul>
 
</div>



Following its successful pilot program, Jamaica’s central bank digital currency is set to become publicly available this summer, Central Bank of Jamaica Governor Richard Byles told Blockworks.



Known as the Jamaica Digital Exchange, or Jam-Dex, the CBDC is intended to make the lives of business owners and consumers easier, Byles said. Jamaica’s economy is primarily cash driven, and a digital Jamaican dollar offers a more secure, convenient alternative.&nbsp;



Jamaica first announced the Jam-Dex pilot program in 2021 with the tagline “no cash, no problem.”



“We spend in excess of $7 million US dollars a year, just replacing notes of all kinds, and that&#8217;s just us. Everybody has to spend money on cash, every business has to spend money on cash.”



The efficiency gains that come with a CBDC will save the government and business owners money, Byles said.



“If you can imagine what it costs a business, especially a high cash-volume business, to manage that cash, to keep it, to store it, to transport it, digital currencies get rid of all that,” Byles added. &nbsp;



Jam-Dex will only be available for domestic use and will operate under a hybrid model which “aims to combine the benefits of both wholesale and retail” CBDCs, the Bank of Jamaica (BOJ) <a href="https://boj.org.jm/a-primer-on-bojs-central-bank-digital-currency/" target="_blank" rel="noreferrer noopener">said</a>. A wholesale CBDC is one  issued by the central bank to commercial banks only for bank-to-bank settlements, as compared to a retail CBDC, which is issued to both commercial banks and the public for general use. 



The BOJ will issue Jam-Dex to commercial banks and to other deposit-taking institutions, such as building societies, merchant banks and authorized payment service providers. These entities will then distribute CBDCs to the retail market.&nbsp;



The structure is similar to what the Federal Reserve mentioned in <a href="https://cms.blockworks.co/fed-opens-debate-on-cbdc-takes-no-policy-stance/" target="_blank" rel="noreferrer noopener">its January </a>report, where officials said that the Fed is supportive of an intermediated CBDC.&nbsp;



“Jamaica is interesting because they have gravitated towards the intermediated model, which is what the Fed is talking about,” said Jonathan Dharmapalan, CEO of eCurrency, which provides technology for central banks to issue and distribute CBDCs.



<blockquote class="wp-block-quote">“The structure is that the central banks are responsible for the minting, issuance and redemption of central bank digital currency, but they&#8217;re not involved in the distribution, they are not involved in the circulation to the public.”&nbsp;</blockquote>



Byles is confident that Jamaicans will want to use the CBDC because it will be accessible through an app on their cell phones, which Byles said the vast majority of Jamaicans own.&nbsp;



“[Jam-Dex] promises to enroll a lot more people in the banking system because it is a product that doesn&#8217;t cost them anything,” he said. “If they have a banking product that sits on that telephone that costs them nothing to use, I believe they will become far more user-friendly towards the banking network than they are currently.”



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