The tail end of every decade inspires reflection and careful consideration of what may unfold in the years to come. As the current financial architecture of the Caribbean is increasingly under siege from threats like de-risking and the increasing costs of compliance, many in the region hope the coming decade will bring increased efficiencies, not less. But first, a brief primer on the definition of cryptocurrencies from well-known finance website Investopedia: “A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology – a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.”
Crypto in the Caribbean
Although futurology, by its nature, is always an inexact science, in many areas of commerce there can be a cautious predictability about expected future directions. Cryptocurrency requires a different calculation. If the Caribbean family wants to capitalise on this growing technology, it first needs to identify crypto’s unique utility to the region and how its development can be nurtured with a view to wider adoption.
Last year, while the rest of the world was experiencing what spectators dubbed CryptoMania – AKA the Crypto Frenzy – a quiet revolution was beginning in the Caribbean. Just as Bitcoin’s falling value during the middle of last year evidenced that a chapter of the crypto craze was nearing an end, numerous nations around the Caribbean were laying the groundwork for greater crypto integration with ambitions for its permanent and ongoing use.
Compounding Interest in Cryptos
In August 2018 the European nation of Malta announced it would no longer accept cryptocurrencies as payments in the island’s Individual Investor Programme (IIP) that has been used by foreigners to become eligible for economic citizenship. By contrast, within the Caribbean one month earlier, an amendment to Antigua and Barbuda’s Citizenship by Investment Program Act permitted payment in cryptocurrencies.
In February 2019 the Eastern Caribbean Central Bank (ECCB) announced it would commence a trial of a central bank digital currency, potentially leading to the world’s first deployment of a central bank digital currency. The project is enabled through a partnership with Barbados’ Bitt and the aim is an eventual full rollout as a currency of legal tender, potentially as soon as 2020. The experiment is called the ECCB Digital Currency Pilot Project and will cost an estimated XCD$ 8mn from piloting to implementation.
In more recent months there has also been progress in the space of routine payments. Via utilisation of the USDC stablecoin pegged to the USD, Bermudians can now pay their taxes in cryptocurrency. This reform is one area of many that Bermuda has pursued to make it more crypto-friendly, with the Digital Asset Business Act (DABA) signalling the seriousness of the nation’s intent. Passed in 2018 and amended in October of this year to expand the licensing regime for digital asset benchmark administrators, digital asset trust service providers and digital assets derivatives, DABA established a formal framework for the governing of businesses engaging in crypto activities.
Such moves by Bermuda are clearly bold to those who still feel ‘the jury is out’ on the long-term value of cryptocurrencies, but the work of lawmakers in Hamilton looks positively modest compared to plans being made in Puerto Rico. The US territory has become an epicentre for crypto ‘true believers’ who envisioned in the island’s most recent post-hurricane recovery period a chance to help rebuild the territory while building a new city called ‘Sol’ (formerly ‘Puertopia’). The idea was a city where all money used would be digital, all contracts would be public and, in the absence of a central bank printing and circulating money, individuals could create their own currency and avoid the need to pay any taxes. For now, much of these goals remain dreams.
Choosing Between Coins and Credit
For advocates of increased crypto use in the Caribbean, greater adoption is overdue. But, for all the colourful headlines about cryptocurrencies and their potential, it is cash transactions that, by and large, are the mainstay of commerce here.
Gradualism with modernising payments – let alone adopting digital currency – is not something exclusive to the Caribbean. While Tokyo is famous for being the glittering capital of Japan, and a city that leans heavily on its futuristic brand to attract business and tourism from abroad, it is also a metropolis that has retained a heavy reliance on small coins for many years after the advent of the credit card.
Across the Caribbean, the lack of accessibility and affordability to more payment gateways continues to be a hindrance on productivity and growth. This applies to crypto, credit cards, and other payment gateways.
