Local officials believe digital currencies will replace hard cash in the future, insisting that it will create an opportunity for more people to have access to financial systems and services.
However, they cautioned that before this could take place in Barbados, all risks should be carefully considered and tight regulations be put in place.
These views were expressed during a panel discussion at the Barbados International Business Association (BIBA) public forum at the Grande Salle of the Central Bank on Tuesday night on the topic Money Without Cash – It’s a Trust Issue.
Senior Examiner with the Central Bank of Barbados Runako Brathwaite made it clear that institution “has not yet issued a formal position on digital currencies”.
However, he said research was ongoing to try to understand the risks of the technologies used to issue digital fiats currency.
“As the regulator it is important to understand these risks. You have risks like data privacy, cyber security, you have fraud, you have consumer protection, there are lots of risks when you talk about issuing a digital fiat,” insisted Brathwaite.
“So with the digital fiat we need to be careful to understand how those risk can impact financial stability, as the regulator we need to ensure that it doesn’t destabilize the economy
He said: “I think going forward, even though it is likely digital fiat will be the next evolution of money it is going to be dependent on the attractiveness of alternative forms of payments and the demand from the public”.
Chief Economist with financial technology firm Bitt, Marla Dukharan said she believe having access to financial services should be a human right, pointing out that being unbanked was something that still affected the region “quite significantly”.
She believed the issuing of digital currencies could help to solve that challenge.
“In order to solve the problem of poverty you have to solve [the absence of] financial inclusion. I feel that being able to store money, transact affordably and securely should be a fundamental human right, because unless you can do that you really cannot lift yourself out of poverty, and most of the people affected by this are women and children,” said Dukharan.
However, she said it was critical for regulatory control to ensure a level playing field and there are no threats to the individual or the financial system.
“Just as you would trust the dollar note or the coin that the central bank issues, if the central bank issues a digital currency it certainly carries the same legal status in terms of being legal tender, but it should also carry with it the same level of trust,” said Dukharan.
“With a digital currency on a mobile app you have the potential to reach and bank people who the banking system has not captured,” said Dukharan.
Meanwhile, Esan Peters, Chief Information Officer and Managing Director of Technology and Operations at CIBC FirstCaribbean International Bank, said financial institutions were willing to work with the financial system “disruptors” and consider digital currencies, but noted that the banks had to be cautious.
“Digitizing a currency is going to be a very challenging thing to do because there will be a lot of factors outside of the technology that we will need to consider. So as we look at it we have looked at models like what exist in Sweden for example, where they are going to a cashless society,” said Peters.
“As the innovators come in the market, we at the bank see it as a pathway or journey that we are on, and eventually there will be a digital currency but we will have to be very [mindful of] the risks. So going to a digital currency what does that introduce into our ecosystem and how do we ensure that same financial inclusion works . . . The other thing of course is security and safety, and finally we have to look at stability. So it is all an ecosystem we have to consider and we are more careful as we make that journey,” he said.
Peters said he did not believe digital payment systems would make commercial banks obsolete, explaining that there would still need to be “some kind of intermediation between the depositors and the lenders”.
A number of companies around the world are already allowing consumers to make payments using mobile apps and digital currencies.
In Barbados, Cave Shepherd is one such establishment. Alison Browne-Ellis, Director of Card Services Division, said that company was keen on helping to propel Barbados into a digital society.
She said the Cave Shepherd Card Mobile App was born out of the need to give customers options and power of choice and allow for financial inclusion.
However, pointing out that Barbadians were generally late adopters, she said it was critical that new products work and work well, that there be an abundance of education and awareness, collaboration and an enabling environment facilitated by Government.