Jamaica becomes first country to recognize CBDC as legal tender

Jamaica recognizes its central bank’s digital currency as legal tender. For the first time in the world.

The Bank of Jamaica (BoJ) has just made a historic decision, making the country the first in the world to recognize its central bank’s digital currency (MNBC or CBDC in English), dubbed the Jamaica Digital Exchange (Jam-Dex), as a legal currency. The country’s economy is largely based on cash, and she hopes that by setting up her CBDC in this way, many unbanked citizens will be able to improve their financial situation.

In the test from last year, Jam-Dex has not yet been issued to the world, will be in a few days. According to Bank of Japan Governor Richard Biles, this new CBDC can be used to “pay for anything in Jamaica.”It is a medium of exchange. These are the funds of our accounts.”

Why CBDC in Jamaica?

Like many countries, there are very few traditional electronic payment methods in Jamaica, so these countries are rushing to implement their CBDCs. According to Steve Aschettino, fintech at Norton Rose Fulbright, “Emerging economies seem to see CBDCs as a way to get their economies off the ground.”He added that the existing infrastructure for payments in developed countries is a double-edged sword, sometimes limiting the motivation to move forward with CBDC.

According to Foreign Secretary and Senator Kamina Johnson Smith, the CBDC will significantly improve the financial well-being of people who do not have bank accounts. And there are a lot of them, partly because they think they don’t have enough money to open it and they don’t have an ID, and the government wants to solve this problem with their National Identity System. And this CBDC should also contribute to the development of the business, since there are no transaction costs.

How Jam-Dex Works

The Jamaican government will keep Jam-Dex off the blockchain to run it on centralized servers. To use it, people must first set up a digital wallet dubbed Lunk. They are provided by banks and some authorized service providers. Money can be added to a smart ATM through a wallet provider (such as a bank).

A financial services business called the JMMB Group is exploring other uses for this CBDC for e-commerce, point of sale, and more. The government is well aware that building a clear infrastructure around the CBDC is essential to its success. The future will show us whether success really exists.