Former governor the Central Bank of Barbados DeLisle Worrell has slammed efforts by central banks around the region to establish central bank digital currencies (CBDCs) such as JAM-DEX here in Jamaica saying they are nothing but a waste of time and resources, because “there is no longer any need for currencies of any kind”.
Worrell, who first expressed the sentiments in an article titled “CBDCs are unlikely to be successful” on centralbanking.com – a financial website with emphasis on central banks, international financial institutions and financial market infrastructure and regulation – shared more with the Jamaica Observer in an interview Tuesday.
“It’s wasting of resources. That’s my view,” he argued as he outlined that it is influenced by what he has seen of the reaction to central bank digital currencies so far. Bolstering his point, Worrell asked, “What is the problem that they are [trying] to address?” while answering rhetorically that “in all the instances in the Caribbean, for example, the reason being given for why digital central bank currencies are being introduced is the so-called financial inclusion. In other words, you want to give people access so they can do transactions.”
But he said, proferring CBDCs as the tool to include more people in the financial system is a farce, since the same can be achieved by simply allowing those targeted to be able to open a bank account and getting a card tied to it for transactions, something which already exists.
“To me, in the Caribbean, our banking network is extensive and now with online banking, you can get an app on your cellphone that you can do all your banking arrangements with, and so on. So it seems to me that anybody with a steady income and who has a fixed residence, and so on, is eligible to get a bank account. You don’t have to have a branch of the bank in your particular location, so long as you have an ID and [are] not under any legal restrictions and have a fixed abode, and so on, you can open a bank account. Once you open a bank account, then you get a bank card and you have solved the problem of access. So, why do you need a digital currency? You have your bank card, you can do everything you need to do with your bank card. Monies can be deposited in your account and you can use it to make small payments,” he said.
For him, CBDCs do not give any greater access than bank cards do. In addition to that, Worrell said both facilitate transactions using an Internet platform, arguing that that means “getting people financially included will take them having reliable Internet. That’s all you need.”
“Once you have reliable Internet, a CBDC is superfluous. It doesn’t provide you with any service or anything that you can’t have with a bank card and a cellphone. And in fact, you now have cellphone apps that eliminate the need for you to even have a bank card.”
He said all central banks are doing is taking on something that is “difficult and costly” and said the energy being put into establishing CBDCs should be focused on finding solutions to the region’s correspondent banking issues.
“Those are the problems that we need to overcome, and so my argument is that the central bank digital currencies that are being put in place are not going to overcome those problems, so why do any of them?”
In his opinion piece published on centralbanking.com Worrell pointed out, “At one time it was hoped that some form of digital money might assist in overcoming the problems caused by the loss of correspondent banking services by many developing economies. This proved not to be the case, because the instructions for the international transfer of value are intermediated through a bank-based system of identification and confirmation. For similar reasons, the use of digital currencies by some countries to avoid economic and sanctions has proved ineffectual.”
Worrell’s overall argument seems to resonate here in Jamaica where the Bank of Jamaica (BOJ) has been actively trying for the last few years to roll out its CBDC called JAM-DEX. Already, the National Commercial Bank (NCB), through its digital wallet, Lynk, offers the CBDC to its customers and has already registered over 200,000 participants. Before August of last year, Lynk embarked on an extensive marketing campaign to establish awareness and onboard customers but has had limited success otherwise, especially with just over 5,000 merchants accepting JAM-DEX as payment.
So far, Lynk has pivoted. With its budget slashed, it has turned to focusing more on capturing business in the remittance market to justify the spend it has already made while it targets more businesses to accept JAM-DEX. The Business Observer understands talks are ongoing with fast-food outlets in that regard. The app now enables users to purchase mobile phone credit; utilise its bill payment feature to pay utility companies, insurance brokers and loan agents, and transfer funds to other Lynk accounts.
The BOJ last year also announced that JN Bank was approved to issue JAM-DEX and though the bank issued a release in February saying it is finalising its digital wallet, JN Pay, to facilitate CBDC transactions, it is not clear how far it has reached with such efforts.
The Business Observer reached out to the BOJ to ascertain successes in its own efforts to establish JAM-DEX but was told that Natalie Haynes, the deputy governor for banking, currency operations and financial markets infrastructure, was on leave.
Still, for Worrell the efforts are in vain unless CBDCs address the problems of the tardiness and cost of retail payments.
“Once we dispense with the notion of a currency, there seems no reason to prefer a digital form of central bank money to the retail platforms which already exist,” he pointed out.
The former central bank governor wrote: “The sentiment that digital currencies are the future of money is based on the misapprehension that digital money is a novelty. On the contrary, money is already digital, as is the entire system of modern payments, both domestic and international. What remains of the old system of holding notes and coins to be used for making payments is a small residual. Rather than provide a digital equivalent, policies should focus on providing fast reliable Internet systems universally, thereby providing everyone access to the bank-based payments system, and measures to raise the incomes and life circumstances of the poor so that they are able to enter the banking system.”
