The Cen­tral Bank of T&T is ac­tive­ly look­ing at the fea­si­bil­i­ty of is­su­ing a dig­i­tal cur­ren­cy here.

“With re­gards to CB­DC (Cen­tral Bank Dig­i­tal Cur­ren­cy), the Cen­tral Bank con­tin­ues to be open but cau­tious and prag­mat­ic in its ap­proach. In 2020, the Cen­tral Bank con­duct­ed pre­lim­i­nary re­search in­to the fea­si­bil­i­ty of is­su­ing a lo­cal CB­DC and is fur­ther­ing its due dili­gence study in 2021 with the as­sis­tance of the IMF whilst fo­cus­ing on strength­en­ing the broad­er frame­work for pay­ments via key chan­nels (such as leg­is­la­tion and in­fra­struc­ture),” the Cen­tral Bank stat­ed in its re­cent­ly pub­lished Fi­nan­cial Sta­bil­i­ty Re­port 2020.

A CB­DC is a dig­i­tal form of fi­at mon­ey, which ac­cord­ing to the Fi­nan­cial Sta­bil­i­ty Re­port 2020, is a “safe, neu­tral and ul­ti­mate set­tle­ment medi­um that can ex­tin­guish all claims in a trans­ac­tion.”

The Cen­tral Bank said in 2019, mon­e­tary au­thor­i­ties took se­ri­ous note of Face­book’s an­nounce­ment of its sta­ble­coin, for­mer­ly called the Li­bra, and be­gan giv­ing more ac­tive con­sid­er­a­tions to CB­DC in or­der to pre­clude the ad­verse im­pacts on mon­e­tary and fi­nan­cial sta­bil­i­ty of pri­vate sec­tor dig­i­tal cur­ren­cies.

“To date, sev­er­al ju­ris­dic­tions have com­plet­ed pi­lots and are in ad­vanced stages of CB­DC re­search and dis­tri­b­u­tion,” the Cen­tral Bank stat­ed.

The Cen­tral Bank stat­ed that “the threat of los­ing mon­e­tary sov­er­eign­ty, in­ter alia, has com­pelled reg­u­la­tors to con­sid­er is­su­ing CB­DC.”

“For some, di­min­ish­ing cash use, cost­ly and lengthy pay­ment trans­ac­tions, tax eva­sion, and fi­nan­cial in­clu­sion are key rea­sons for is­su­ing dig­i­tal fi­at. Ac­cord­ing to the lit­er­a­ture, the main ben­e­fits for reg­u­la­tors of a well-de­signed CB­DC are im­proved op­er­a­tional ef­fi­cien­cy and pru­den­tial sur­veil­lance, re­duced fi­nan­cial ex­clu­sion and en­hanced macro-fi­nan­cial su­per­vi­sion, which ad­dress some of the is­sues cre­at­ed by tra­di­tion­al forms of mon­ey,” it stat­ed.

“How­ev­er, sev­er­al draw­backs al­so ex­ist such as, cy­ber-at­tacks, which are like­ly to lead not on­ly to ser­vice dis­rup­tions but al­so ad­verse­ly af­fect eco­nom­ic ac­tiv­i­ty, as well as po­ten­tial­ly high ini­tial op­er­at­ing and so­cial costs,” the Cen­tral Bank stat­ed.

Ac­cord­ing to a Bank for In­ter­na­tion­al Set­tle­ments’ sur­vey con­duct­ed in Jan­u­ary 2021, over 80 per cent of the world’s cen­tral banks have ex­plored CB­D­Cs, at vary­ing lev­els.

“As at April 2021, there have been over 15 pi­lot projects (three of which have been com­plet­ed), two live CB­D­Cs and over 30 pub­li­cised projects in the ex­plo­ration and re­search phase. As it stands, there are two CB­DC vari­ants that have been adopt­ed, test­ed or are un­der-re­search, re­tail CB­D­Cs (R-CB­DC) and whole­sale CB­D­Cs (W-CB­DC),” it stat­ed.

The Cen­tral Bank said the R-CB­DC is a cash-like vari­ant that is ac­ces­si­ble to the gen­er­al pub­lic, while W-CB­DC is anal­o­gous to cen­tral bank re­serve mon­ey that is on­ly ac­ces­si­ble to se­lect­ed en­ti­ties.

“Thus, of the projects un­der­tak­en, R-CB­DC ap­pears to be the pop­u­lar choice, es­pe­cial­ly in emerg­ing mar­kets. Oth­er ac­com­mo­da­tions made to per­mit the is­suance of CB­DC have re­quired changes to ju­ris­dic­tions’ leg­is­la­tion and reg­u­la­tion,” it stat­ed.

The Cen­tral Bank point­ed out that cross-bor­der use cas­es have al­so con­tributed to the adop­tion of CB­DC en­gage­ments.

“Dri­ving these ini­tia­tives is the need to im­prove in­ter­na­tion­al pay­ments sys­tems. For these use cas­es, the W-CB­DC vari­ant has dom­i­nat­ed this area of CB­DC re­search and ex­per­i­men­ta­tion. Re­cent ex­am­ples in­clude Project Stel­la (Eu­ro­pean Cen­tral Bank and the Bank of Japan), Project Jaspe­rU­bin (Bank of Cana­da and the Mon­e­tary Au­thor­i­ty of Sin­ga­pore) and the Mul­ti­ple CB­DC, mCB­DC (in con­junc­tion with the Hong Kong Mon­e­tary Au­thor­i­ty, the Bank of Thai­land, the BIS In­no­va­tion Hub, the Dig­i­tal Cur­ren­cy In­sti­tute of the Peo­ple’s Bank of Chi­na and the Cen­tral Bank of the Unit­ed Arab Emi­rates),” it stat­ed.

“Par­tic­u­lar to the Caribbean, op­er­a­tional in­ef­fi­cien­cies cre­at­ed by the ge­o­graph­i­cal dis­per­sion of per­sons and ser­vices was a dri­ving fac­tor for con­sid­er­ing CB­DC in the Ba­hamas and the Or­gan­i­sa­tion of East­ern Caribbean States. In 2020, the Sand Dol­lar was launched in the Ba­hamas, and in March 2021, DCash—a pi­lot project—was launched in the East­ern Caribbean Cur­ren­cy Union. In Ja­maica, there are plans to pur­sue a lo­cal CB­DC. The Bank of Ja­maica is col­lab­o­rat­ing with Ire­land-based tech­nol­o­gy firm eCur­ren­cy Mint to de­vel­op and test a pro­to­type CB­DC over the pe­ri­od May to De­cem­ber 2021,” it stat­ed.

The Cen­tral Bank not­ed that oth­er ter­ri­to­ries in the re­gion have ex­pressed in­ter­est but are still in the ex­plorato­ry phase.

“In T&T, sev­er­al pub­lic and pri­vate ini­tia­tives, are im­prov­ing the flow of funds in the econ­o­my. These ini­tia­tives, along with T&T’s elec­tric­i­ty ac­cess, in­ter­net and mo­bile us­age pen­e­tra­tion and glob­al con­nec­tiv­i­ty in­di­ca­tors, sug­gest that the coun­try is pre­pared for fin­tech in­no­va­tions,” it stat­ed.

Last year, the Ba­hamas be­came the first na­tion to is­sue its of­fi­cial cur­ren­cy in dig­i­tal form.

The Sand Dol­lar is de­signed to ex­tend fi­nan­cial ser­vices across the At­lantic Ocean arch­i­pel­ago of 700 is­lands.

In an in­ter­view with the Wall Street Jour­nal, John A Rolle, gov­er­nor of the Cen­tral Bank of the Ba­hamas, said the Sand Dol­lar is de­signed for those times when a cred­it card is not con­ve­nient.

He said the dig­i­tal cur­ren­cy is a pub­lic good and, de­spite how it re­quires com­plex pol­i­cy choic­es, is a sen­si­ble way for a small coun­try to mod­ernise its fi­nan­cial sys­tem.

But what is the dif­fer­ence be­tween a CB­DC vs Bit­coin and oth­er cryp­tocur­ren­cies?

Well, ac­cord­ing to CB­DC, a Sand Dol­lar is a di­rect li­a­bil­i­ty of the cen­tral bank, in the Ba­hamas, backed by the for­eign re­serves.

“Cryp­tocur­ren­cies are pri­vate sec­tor is­sued or mint­ed. While they may be backed by oth­er as­sets, in­clud­ing cen­tral bank cur­ren­cies, they may not rep­re­sent the li­a­bil­i­ty of any gov­ern­ment or cen­tral au­thor­i­ty. In some cas­es, cryp­tocur­ren­cies may al­so not be backed by an un­der­ly­ing as­set,” it stat­ed.

Project Sand Dol­lar is the ini­tia­tive em­barked up­on by Cen­tral Bank of the Ba­hamas to is­sue its own dig­i­tal ver­sion of the Ba­hami­an dol­lar (B$) as well as im­ple­ment the ap­pro­pri­ate dig­i­tal pay­ments sys­tem in­fra­struc­ture to suf­fi­cient­ly un­der­pin the op­er­a­tion of a dig­i­tal cur­ren­cy ecosys­tem.

Last week, it was an­nounced that Ba­hami­an res­i­dents will now be able to pay for gov­ern­ment ser­vices with the new dig­i­tal Sand Dol­lars.

Di­rec­tor of the Rev­enue Au­dit and Cash Man­age­ment Unit at the Min­istry of Fi­nance Nicole Reil­ly said: “Phase one of the Sand Dol­lar ecosys­tem build, which en­com­pass­es rev­enue col­lec­tion for gov­ern­ment agen­cies, is now com­plete on the tech­ni­cal side.

“We are ea­ger to move on­to phase two, which in­volves gov­ern­ment ex­pen­di­ture pay­outs in Sand Dol­lars through­out the cash dis­tricts of our South­ern Ba­hami­an is­lands. The ten­ta­tive date for this phase to go live is set for Sep­tem­ber 1, 2021.”