As I informed readers in the previous article, this blog’s purpose is to provide information regarding Web3, particularly concerning Jamaica and the Caribbean. As such, an article on Jamaica’s new central bank digital currency (or CBDC), the Jam-Dex, was a no-brainer. It had to happen. So I began researching it. That being said, let me start with the disappointing news: Jam-Dex is NOT a web3 technology.
It is not a cryptocurrency.
It is not based on a blockchain.
It is not decentralized.
It is not pseudo-anonymous. (Well, this last one might be true, depending on how you look at it.)
What is Jam-Dex?
That is an excellent question and one that, unfortunately, I can’t answer in detail. I know that the above statements (it not being a cryptocurrency and not built on a blockchain) are true because BoJ said so themselves in their FAQ on Jam-Dex, but beyond that, I’m not entirely sure how the technology behind Jam-Dex works. There doesn’t seem to be a detailed whitepaper available (and if I am wrong about this, please email me and let me know).
When the Bank of Jamaica decided to implement their own CBDC they fielded many proposals from several developers, with solutions ranging from the aforementioned blockchain technologies, to more traditional, and even hybrid solutions. They settled on a solution provided by a company called eCurrency Mint Ltd. According to Bloomberg.com, “[eCurrency’s] technologies provide e-currencies which are central bank governed and has inherent trust and transparency of digital transactions, enabling users to get the benefit of using safe and secured e-currencies.”
Unlike cryptocurrencies, this “Jamaican eCurrency” is legal tender and is backed by the BoJ at a 1:1 rate with the Jamaica dollar. You can swap Jamaican cash for its direct eCurrency equivalent. And, unlike bank deposits that are secured by the Deposit Insurance Scheme for up to JM$1.2M, the BoJ will replace all eCurrency funds if lost.
To hold JamDex you will need a CBDC wallet. To get a CBDC wallet all you need is to take your TRN and photo ID (passport, driver’s ID, or voter’s ID) to a commercial bank, building society, merchant bank or authorized payment service provider (according to the BoJ FAQ). To load money into your CBDC wallet you can go to either one of the aforementioned institutions, a SMART ATM, or over your phone and load from one of your bank accounts.
By holding your CBDC wallet on your phone or tablet you may use it at participating businesses or even transfer funds to other wallet holders. You may also use it to pay for government services.
However….
What Jam-Dex is NOT!
Jam-Dex has none of the characteristics that make it an exciting piece of web3 technology.
It is not public and cryptographically secured
It might be crypto-secured, in some way, shape, or form, but it’s not public. The fact remains that as a piece of undoubtedly patented technology, only those engineers and product developers who work at eCurrency Mint, and those high in the chain at BoJ, really know how it works and what functionalities it offers. Is this a good thing? Maybe, maybe not.
It is not pseudo-anonymous
Now, according to the BoJ, the only entities that will have access to the PII (Personally-Identifying Information) related to CBDC wallets will be the institutions that issue them. So the government will be only one step removed from all of your spending data. Okay…
It is not built on top of a blockchain
So what is it built on top of? I don’t know for certain, but I do know that the requests in their bid for proposals were that it “provides the ability for BOJ to conduct all the currency management processes of a central bank…; provides seamless integration with the existing financial market infrastructures in Jamaica, in particular the JamClear® Real Time Gross Settlement System (RTGS), at the earliest possible timeline and allows for quick scalability.” In other words, “more of the same, please.”
It cannot be traded on crypto exchanges
The BoJ says that JamDex cannot be traded internationally. It is strictly for use within the local economy. It cannot be used to purchase goods overseas. It cannot even be used to purchase other CBDCs. However, one good thing it has going for it is that it may make receiving remittances WAY easier.
What’s the purpose behind JamDex?
According to the BoJ, JamDex has many benefits.
For consumers and businesses:
- Convenience: simple, secure, and easy to use
- Greater financial inclusion: the 17% of unbanked individuals and the greater pool of under-banked individuals may now be able to benefit from inclusion in the formal economy.
For the financial system:
- Increases in efficiency and reduction in costs
- A wider array of services available to the public and an opportunity to innovate new products complementary to CBDC use.
For the BoJ
- Increased efficiency in forecasting currency needs
- Long-term cost savings
- Modernisation and digitisation of the economy
CBDCs Around the World
There are currently 114 central banks around the world that are either researching, developing, testing, or fully using their own version of central bank digital currencies. These digital currencies use their particular suite of technologies but most of them are implemented using a database run by either the central bank, the government, or an approved private sector entity. Given that CBDCs are centrally controlled, very few, if any of them, are built on blockchain technology, even though cryptocurrencies are the original inspiration (and perhaps, ultimately, competition) of CBDCs.
The first major country to issue a CBDC was China with their Digital RMB. Some of the major economies of the world whose central banks have now issued their own CBDCs are India (The Reserve Bank of India) with the Digital Rupee, Nigeria (Central Bank of Nigeria) with the e-Naira, Russia (Bank of Russia) with the Digital Ruble, and Brazil (Central Bank of Brazil) with the Drex. In the Caribbean, Jamaica has joined The Bahamas and the OECS (Organisation of Eastern Caribbean States) islands with their Sand Dollar and DCash, respectively.
Concern around CBDCs
Unfortunately, a growing trend around the world is the distrust of governments and government institutions. So naturally, there has been a plethora of conspiracy theories around the true purpose of, or the recent interest in, the implementation of CBDCs.While I personally don’t hold any particular belief in these theories, someone once said “If you wonder why people don’t trust governments, just take a look at history.” That being said, I think it’s only fair to expound on them somewhat.
Spying on the populous
Every time a CBDC is used, the entity that issued the holding wallet maintains a record of the transaction. We already live in a world where nearly everything we do is tracked and measured, but at least these records are only being maintained by corporations that (hopefully) only want to become financially successful and are (hopefully) bound by law regarding what they can do with said records. Plus, these are different organisations, each holding a small piece of the puzzle. Now imagine if those records were being maintained, instead, by a single government entity. What could they know about you by analysing your purchase history? What could they not?
Tyrannical Control
We don’t know what goes into developing CBDCs. We don’t know what kind of functionality they may have introduced. To cite a recent and still disturbing event in history, suppose another virus pandemic were to occur. Would we then find out that our local CDBC doesn’t work after curfew, or before the curfew is lifted? Or that we can’t make purchases more than a mile from where we live? What other hidden functionalities might it possess?
Wealth Redistribution
By being able to analyse how much money is within each wallet, the government may decide that, for the sake of peace within the nation, some individuals should have more money. All it may take is the stroke of a few keys and some additional zeros pop up in someone’s wallet. However, the government realises that if they add too many new dollars to the economy then inflation will eat up all of its value, so to keep things balanced, they take a few zeros from someone else’s wallet.
Now, it would, in my view, be really bad news if the government tried to implement any of these measures, but I wouldn’t say that it’d be “impossible”. However, I do believe that it will be a long time before the government attempts anything too overt or tyrannical. For one thing, they’d need JamDex to have 100% adoption for any of it to be truly effective, and we are a far way away from that.
So What Now?
Well, JamDex is here, and the “cashless society” that some are afraid of seems to be on its way. Fair enough. JamDex was launched in August 2021 when the first J$230M of JamDex was “minted”. So far, so good. I haven’t used JamDex or gotten the wallet but if anyone reading this has, please drop a line in the comments. Tell us what your experience has been like. Is it easy to use? Are there many merchants using it? Do you find yourself asking yourself “Why didn’t I do this sooner?” Let us know.
I can imagine that with each new CBDC that goes into production, a whole bunch of think tanks around the world start collecting data on the new endeavour, to better advise their client countries on how best to design, develop and implement their own CBDCs. Well, we’ve recently joined the experimental petri-dish.
My advice: get involved but stay diversified.
Yes, get a wallet and put some JamDex in it. Not ALL of your money, but just a tups. Learn how to use it, and where it can be used. But at the same time, cash is KING, so always have some of that. And some foreign exchange. And some crypto. And buy some shares. Never put all your eggs in one basket.
Anyway, that’s all for this week.
Thanks for spending some time exploring JamDex with me. Take care.
Next week we’ll be looking at the recent authorization of Spot Bitcoin ETFs by the SEC in the US, the upcoming “Bitcoin Halving” event slated to happen later this year, and the possible effects both of these may have on the value of Bitcoin.
Vernon DaCosta 