Central bank digital currencies (CBDCs) were launched in Jamaica and The Bahamas with ambitious promises: to promote financial inclusion, to stabilize the monetary system, and to foster competition. Yet several years in, the evidence shows that the CBDCs in both countries have failed to gain traction with consumers and businesses. Instead, the CBDCs have become little more than vehicles for government handouts, distributed through limited-time giveaways and incentive programs.
Although the data are limited, I explain at length in my new briefing paper that the increased amount of CBDC in circulation (Figure 1) in Jamaica largely reflects government programs.
By combing through reports from the Bank of Jamaica, I was able to identify that most of the abrupt jumps in circulation can be traced back to government handouts (Table 1). And the experience in The Bahamas is similar. In fact, the Central Bank of The Bahamas itself admits that CBDC use was “impacted by the significantly reduced levels of government transfer payments.” For example, the central bank said the total value of wallet top-ups had fallen from $38.4 million to $7.1 million as the government stepped away.
These early experiments provide a cautionary tale for other governments weighing whether to launch a CBDC. People are served well by cash, prepaid cards, debit cards, credit cards, payment apps, and cryptocurrencies. They don’t need the government to step in and reinvent the wheel.
Do you want to learn more about the Caribbean experience? My new briefing paper, CBDC Lessons from the Caribbean: Analyzing Central Bank Digital Currency Adoption in Jamaica and The Bahamas, can be found here.
