2.2 Latin America and the Caribbean The Latin America and the Caribbean (LAC) region has engaged in research and development, piloting and launching central bank digital currency. There are several examples of countries in the region that have explored the benefits and challenges associated with CBDC implementation. The Central Bank of Brazil has been studying the potential benefits and risks of a digital real. Research in Brazil has emphasized the importance of promoting financial inclusion by leveraging CBDC technology to reach unbanked populations and reduce the costs associated with traditional payment systems.9 In the Caribbean, the Central Bank of the Bahamas has launched the “Sand Dollar”, a digital version of the Bahamian dollar, which aims to improve financial access, reduce cash use and enhance the resilience of the country’s payment system.10 In 2019, the Bahamas was the first country to issue a retail CBDC. Pegged to the US dollar, the Bahamian Sand Dollar is based on digital ledger technology (DLT) with a hybrid wireless network to connect mobile devices. The Bahamas prioritized this advancement since 18% of its population is unbanked, and frequent bouts of severe weather hinder cash distribution. However, interest levelled off after an initial surge, and by mid-2022, only about 30,000 Sand Dollar wallets were in use in the Bahamas (an adoption rate of nearly 8%). The slowdown is surprising in a country with 90% penetration for mobile devices, but when surveyed, around 77% of Bahamian firms said that checking accounts were still their most used payment method.11 Sand Dollars in circulation ($) F I GUR E 2 0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 December 2019: Project Sand Dollar begins October 2020: Beginning of nationwide release to the public December 2020: Crypto law Digital Assets and Registered Exchanges Act August 2021: Bahamian Dollar Digital Currency regulations March 2022: Initial integration of the Sand Dollar with the Bahamas Automated Clearing House system Source: Deutsche Bank; Central Bank of the Bahamas. The Eastern Caribbean Central Bank (ECCB) has also been at the forefront of CBDC research. In 2021, the ECCB launched DCash, the first digital currency used in a monetary union, with eight out of nine member states participating. The CBDC has no transaction fees and was intended to facilitate digital money transfers made to consumers and merchants. However, on 14 January 2022, the DCash program crashed due to an “expiring certificate” on the technology that hosts the CBDC and was offline for two months.12 The ECCB intends to introduce an e-commerce function that will enable businesses to accept DCash via websites and engage a local marketing agency to promote DCash and encourage education about the technology. The research conducted by the ECCB focused on testing the technical feasibility, security and scalability of a CBDC in a small island economy.13 Furthermore, in 2022, Jamaica launched its own CBDC, the Jam-Dex, through a digital wallet known as the Lynk app. To open a wallet, users are required to upload one government-issued photo ID and a copy of their taxpayer registration number.14 As part of the launch, the Bank of Jamaica offered a $16 incentive for the first 100,000 users who activated wallets.15 The Central Bank of Jamaica also implemented an in-person public education programme across the island under the banner of “No Cash, No Problem”.16 As of August 2022, there were more than 120,000 users and over 2,300 merchants on the Lynk platform. More recently, there have been additional rollouts to new wallet providers, with JN Bank onboarded in December 2022.17 The below features are specific to the LAC region that impact CBDC development. These distinguishing features reflect considerations of the region. Central Bank Digital Currency Global Interoperability Principles 9
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