Predictions from economists across the globe suggest that money could become completely digital in the near future. Over the years, physical money in the form of coins and notes has increasingly been replaced by more abstract means of payment, such as bills of exchange, cheques and credit cards. Today, there are even more alternatives to physical cash, such as digital currency in the form of cryptocurrencies and central bank digital currencies (CBDC).
Ricardo Dystant, Chief, Digital Transformation and Special Projects at JN Bank, says while younger generations are moving apace with the new developments, seniors should not be left behind.
“Many seniors citizens are tech savvy and will need to understand the intricacies of digital currencies just like their younger counterparts. It is, therefore, important that the information is readily available to them.”
Here are a few facts about digital currencies:
What are digital currencies?
Mr Dystant explained that digital currencies are a method of payment or a medium of exchange, just like cash, except that it exists in a digital form. Some digital currencies are regulated, as in the central bank digital currency (CBDC), while others are unregulated, such as Bitcoin, which is a cryptocurrency. Digital currency is an overarching term that can be used to describe different types of currencies that exist in the electronic realm.
Cryptocurrencies are unregulated and decentralised, which means they do not have the backing of a government or central bank. Unlike the Jamaican or the US dollar, there is no central authority that manages and maintains the value of a cryptocurrency. Instead, these tasks are broadly distributed among the users of cryptocurrencies via the internet.
“You can use ‘crypto’ to buy regular goods and services, although most people invest in cryptocurrencies as they would in other assets, like stocks or precious metals. While cryptocurrency is a novel and exciting asset class, purchasing it can be risky as it is highly volatile,” the JN Bank executive remarked.
“It is, therefore, advisable that you conduct a lot of research to fully understand how each system works,” Mr Dystant added.
What is a central bank digital currency (CBDC)?
A CBDC is essentially an electronic form of currency issued by the government or a central bank of a country, for example the Bank of Jamaica (BOJ),” Mr Dystant said. He informed that CBDCs are regulated and have the support of a governing body, which makes them much safer in the eyes of some critics. “CBDC rates are stable”, he said. “Basically, the CBDC is just another form of the money being issued by the central bank, one is in physical form and other is electronic or digital.”
Jamaica joins a list of countries that have also launched their own digital currency, including several eastern Caribbean nations, Nigeria, China, and Sweden. CBDCs have utility like that of physical currencies. They can be used to purchase goods and pay for services.
Mr Dystant noted that persons will be able to utilise Jamaica’s CBDC the same way they now use cash to purchase goods and services.
“All they will need is a digital ‘wallet’, which is like a bank account that holds the value of your digital currency. The wallet provider can issue you an app for your mobile device or you can log onto a website to access your account. You will then be able to use your electronic money. Wallet providers will also allow you to cash in or cash-out via several means including debit/credit cards, ATMs, agents and bank accounts etc. Each provider will vary depending on their capabilities,” he informed.