The U.S. may not see a "digital dollar" anytime soon — last week, new Fed Vice Chair Lael Brainard testified to the House Financial Services Committee that if Congress did instruct the Fed to create a digital dollar, it could take five years to implement the security features needed to roll one out. But Americans getting impatient to see the possible future of currency need look no further than their own backyard. In the Caribbean, central bankers are moving more swiftly. As the vast majority of central banks around the world consider or start to implement Central Bank Digital Currencies — which integrate technical upgrades, like blockchains, into existing national currency systems — the region’s central banks are winning the early adoption race. Why the Caribbean, of all places? Smaller countries can sometimes move more nimbly than large ones, and digital currencies offer developing countries a chance to “leapfrog” rich ones by skipping over intermediate technologies to adopt cutting-edge ones. The region’s early forays into the future of fiat currency offer the rest of the world a chance to watch and learn. In October 2020, the Bahamas became the first country in the world to issue a CBDC, the Sand Dollar, nationwide. Under the scheme, the country’s central bank issues the sand dollars as digital tokens recorded on a blockchain, which citizens can spend via a mobile phone app or with a physical card. So far, uptake has been minimal, according to a new report from the International Monetary Fund. It found the Sand Dollar accounts for less than a tenth of a percent of Bahamian dollars in circulation. The report recommended that the country step up its education efforts and strengthen its cybersecurity safeguards. The Bahamanian experience has been happier than that of the Eastern Caribbean, where several island nations, including Grenada and Dominica, participate in a regional monetary union. Last March the Eastern Caribbean Central Bank rolled out its blockchain-based CBDC, DCash, for public use in several of the island nations that participate in its regional monetary union. But in January, a technical glitch related to an expired security certificate took down DCash, and it stayed down for weeks. Next out of the gate is Jamaica, which began rolling out its CBDC, Jam-Dex (official slogan: “No cash, no problem”), earlier this year with plans to make it publicly available this summer. So far, the biggest points of controversy appear to be complaints over its potentially confusing name (In crypto-speak “Dex” refers to a decentralized currency exchange) and its logo. That might sound trivial, but at a time when millions of people around the world are eschewing their national currencies for cryptocurrencies and dollar-pegged stablecoins, branding could make or break CBDCs in some corners of the globe. The region’s projects carry special implications for digital currencies’ potential to reach unbanked populations, according to Carmelle Cadet , a former IBM executive who founded EmTech, a company that supports CBDC initiatives. Much of EmTech’s focus has been on the Caribbean and West Africa, another early-adopting region with a large proportion of unbanked citizens. Nigeria — the world leader in crypto adoption, according to a 2020 survey that found one-third of adults used it — launched its eNaira in October, and Ghana is piloting an eCedi. “So far, financial inclusion has been a big driver for those markets,” said Cadet, who said West African officials have been studying the Caribbean projects. There's one big contrast between these early pilot programs and what a digital currency's arrival might look like in many bigger Western economies. In the Caribbean and West Africa, digital currency launches have been focused on consumers, who can use them to make payments via apps on their smartphones. In Europe, however, Cadet says the development of CBDCs has been more geared towards wholesale uses — i.e. for transactions between banks. (It remains undecided what a form a digital dollar might take, but there are several signs, including a section on financial inclusion in a recent Fed report on the future of the dollar, that a retail component is being seriously considered) If this all sounds like a lot to keep track of, CBDCTracker.org and the Atlantic Council both offer global overviews of the race to issue digital fiat currencies. And if your job involves central bank policy, perhaps now would be a good time to book a Caribbean cruise.
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