Proponents of crypto assets are trying to make the case that trade among Caribbean countries can double from current levels of US$2 billion by adopting digital money as complementary currency for transactions.
One of the selling points was that the use of a digital currency would eliminate correspondent banking problems and existing liquidity challenges faced by the region over the settlement of foreign-currency transactions.
A cross-border project involving Jamaica and Barbados to test the practicality of the system is in the discussion stages.
The arguments coming from Dr Jan Schröder, founder and chief systems architect for Caribcoin, developed by Barbados-based Abed Ventures Inc, involved a pitch for broad acceptance of the crypto asset Caribcoin and its offshoot Carib$ as alternatives to the US dollar, which is broadly used for trade within the Caribbean region.
The pitch on Wednesday was done at a webinar facilitated by the Caribbean Telecommunications Union, CTU, to explore the potential for digital or complementary currencies in the region. The panel featured Schröder and economists as presenters.
Antonio Alleyne, a University of West Indies lecturer in economics, asserted that until people can make or earn money directly using digital currency, instead of just being asked to convert local currency to the complementary currency, “buy-in for use will be poor”.
Inter-Caribbean trade is only 19 per cent of total regional trade, with challenges including not only currency access, but country size and production levels.
The CTU is of the view that inter-regional trade could be more robust, but noted that the Caribbean’s “financial disconnect hampers the development of the Caricom Single Market and Economy”.
Trade among members in the CSME bloc is just 10 per cent, the CTU said, whereas the European Union’s intra-regional trade, for example, was “a substantial 68 per cent”.
Schröder’s proposal is being supported by the Caribbean Telecommunications Union, which described Caribcoin as “an asset-backed complementary currency designed to maintain a stable value”. It would eliminate the current heavy reliance on foreign correspondent banks and limited USD liquidity, saying the dependence had “resulted in expensive, slow, and de-risking-prone cross-border payments”, the agency said.
Many cryptocurrencies have no underlying assets. Those that are asset-backed or pegged to a currency are generally classified as stablecoins.
In Jamaica’s case, its digital currency, Jam-Dex, is backed by the central bank and has been designated as legal tender, equivalent in value to cash. Regarding buy-in, Jamaica has less than $260 million of its nascent Jam-Dex in circulation, whereas cash circulation is estimated at $288 billion.
Complementary currencies are alternative forms of currency that operate alongside a country’s legal tender and are confined to specific regions, business networks, or sectors.
Increasingly, digital and cryptocurrencies are being used to pay for products or services within specific groups defined by geographical boundaries or specific common interests.
Maiden project
Schröder said at the forum that Caribcoin’s maiden project, intended for execution in 2023, is targeted at Jamaica and Barbados.
The entrepreneur is seeking 10 to 15 businesses in Jamaica and Barbados to participate, as well as payment providers to facilitate the transactions.
He said the transfer fees would be US$2 per transaction, which he described as competitive.
Caribcoin, a two-year-old start-up, is also in talks with regulators about the project.
For his company, Schröder said achieving 10 per cent of regional trade using Caribcoin would ensure profitability for the initiative.
“We would love to see the success of this project,” said CTU Secretary General Rodney Taylor in endorsement.
But Alleyne, the UWI economist, noted that for the initiative to succeed, the proponents needed to address three key things: “the facilitation of settlement; the transactional cost; and the strength of community buy-in”.
“If the CSME is anything to go by, this is going to be long and drawn out. There is potential. We do not have to challenge international rules or challenge local currencies, but the practicality of it remains a challenging task,” he said.
“Greece has one of the largest take-up [of a complementary currency] with 17 per cent of businesses participating. That is what we want,” he added.
“There needs to be a facility to earn or make money from Caribcoin, instead of just converting your local currency to Caribcoin,” the economist said.
Presenter Leander Bindewald, an expert on community currencies, said buy-in won’t come from media hype or coverage, but clear demonstration of successful transactions.
“Look for beneficiaries who need it,” said Bindewald. “The currency will succeed if a single transaction goes through that otherwise would not have happened. Success will happen based on user experience,” he said.
Gervase Warner, CEO of the Caribbean Private Sector Organisation, said that crypto projects had led to some losses, but “we cannot be so risk-averse that we prevent the region from advancing”.
Warner, who is the CEO of Trinidad-based conglomerate Massy Holdings Limited, also batted for the inclusion of Trinidad & Tobago in the Caribcoin pilot.
“We are interested in this because it provides an opportunity to solve a problem. Trade is slow between OECS and Trinidad because there is a payments settlement problem ...,” he said.
“There has to be a private sector-driven approach to solve this. My question is, why Jamaica and Barbados.? Why not include the country which accounts for 48 per cent trade in goods and 45 per cent trade in services?” he added, in reference to Trinidad.
Schröder explained that Barbados and Jamaica were selected for the pilot because of equality in trade between the two, but that the suggestion to include Trinidad would be considered.
avia.collinder@gleanerjm.com