Digital money

The Eastern Caribbean Central Bank's digital currency initiative makes progress.

The Eastern Caribbean Central Bank (ECCB) has begun issuing its digital currency, DCash, that can now be used in a closed pilot with selected merchants and consumers. This is the final stage prior to the public pilot due by the end of March 2021 and lasting for 18 months. The plan is to rollout to the public in Antigua, Grenada, Saint Kitts and Saint Lucia.

DCash is a securely minted digital version of the EC dollar issued by the ECCB. Consumers can obtain DCash from banks, credit unions and other authorised institutions and can access it via a DCash app.

The objective of the digital currency is to increase the opportunities for financial inclusion, growth, competitiveness and resilience for citizens of the Eastern Caribbean Currency Union (ECCU). A fintech executive comments, “The ECCB is made up of 8 territories, forming a monetary union. A large part of their focus is digital transformation including digitising the EC dollar. It’s meant to solve a number of challenges by improving the ease of moving money around the islands. The banking system is currently very costly and takes a long time. EECB recognises that upwards of 80% of day-to-day or retail transactions were done through analogue means. So, they want to reduce cash in circulation by 50% and use of cheques by 80% by leveraging this technology.”

The initiative is designed to facilitate digital transformation, so vendors can for the first-time access digital payments through a safe asset, backed by the Central Bank. A senior fintech consultant clarified, “This is a Central Bank issued digital currency which has the same legal standing as legal tender within the Eastern Caribbean, which is a monetary union. This is not to be confused with crypto-currency, it’s a legitimate legal tender issued by the Central Bank. So, it has all the protection and backing that a banknote issued from the Central Bank will have.”

“This is a Central Bank issued digital currency […]. This is not to be confused with crypto-currency, it’s a legitimate legal tender issued by the Central Bank.”

Senior Fintech Consultant

There are many other reasons why the ECCU is the perfect test-bed for digital currencies, as the fintech executive explained, “The opportunities are that you can move money across the ECCU easily. There are also positives for cross-border payments, lowering the cost of remittances and providing financial services to the unbanked. We rely on the US dollar intra-island to settle trade, if we had something like this where we have our own agreed upon medium within the wider Caribbean, then there would be no need for the US dollar trade. Overall it’s meant to be faster, cheaper and safer.”

“There are also positives for cross-border payments, lowering the cost of remittances and providing financial services to the unbanked.”

Fintech Executive

 

But what risks are there to the adoption of digital currencies? The fintech executive outlined, “The main risks are scepticism, the digital divide and the population not necessarily being technologically savvy. So lots of effort is being put into ensuring that the applications are simple and easy to use, and that there is a lot of education around the products to ensure that there is good uptake and value to the users. Ensuring a high level of cyber security is also key especially when you have large portions of the population using a single application, as there may be ignorance in use e.g. persons giving out their passwords etc. – however again education is the solution here.”

The consultant agreed that cyber security was a concern but believed the development process and pilot had been well-designed on that front, “The ECCB has been proactive with respect to managing their risks, bringing on intermediaries to ensure technical and quality assurance of the product as its being built, including security measures and auditing for security within the product itself.”

 

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