Above: Shiva Bissessar. Photo by Mark Lyndersay.

Shiva Bissessar, who served as a consultant on the creation of the ECCB’s Central Bank Digital Currency launched on May 31, 2021 agreed to answer questions about the project. Mr Bissessar has contributed articles on cybersecurity to TechNewsTT in the past. Elements of this interview were referenced in BitDepth 1298.

Q: How did the Eastern Caribbean Central Bank beat out every other currency to create a regionally united CBDC?

SB: The ability to produce the second live retail payment system CBDC in the world wasn’t the result of fast thinking. The ECCB must be commended for its in-depth consideration of how to address the long-standing payment system deficiencies that plague several Caribbean territories.

The goal of achieving the benefits of a CBDC was outlined in the ECCB’s 2017-2021, 5 year strategic plan. As Governor Antoine stated at the DCash launch “we cannot outsource our development”, going further to boldly elaborate that “innovation goes at the amortization schedule of legacy systems” and “the pace of our development is at the mercy of decision makers within and outside our environment”. A CBDC can be a mechanism to jump start payment system innovation.

The ECCB is the central bank and monetary authority for an eight member monetary union. The CBDC can be used across all of these island nations, beginning with the first four pilot participating island nations of Antigua and Barbuda, Grenada, St Lucia, St, Kitts and Nevis. Payments and domestic remittances across borders of these territories is immediately available. Additionally, we are mandated to bring online the next four island nations of Anguilla, Dominica, Montserrat and St. Vincent and the Grenadines.

Aside from the ECCB effort, there is the Bahamas Sanddollar which is already live and the Jamaican CBDC currently in development. Haiti has recently announced its plan towards developing their own CBDC. That’s four CBDC efforts in the Caribbean alone. The natural next question here is how do CBDCs interact with each other? How can we achieve cross border settlement?

The answers are still some ways off in the future, however it is a concept that’s within grasp with determination and resolve from Caribbean leadership. Research and technology for wholesale settlement actually preceded the retail payment side, but the challenge may lie in legal, regulatory and policy levels as the issues span national borders.

Q: How much of the success of the effort is due to a pressing need for currency fluency and stability in the EC?

SB: Among the stated motivations of the ECCB in deploying a CBDC are; to reduce cash transactions by 50% by 2025, to increase financial inclusion and to provide a faster cheaper and safer digital alternative for its people.

Handling cash carries a cost for all participants in cash-based economies, from the Central Bank to the financial institutions, to the merchants and consumers. In more advanced economies, the private sector has invested in innovative payments services and products that have contributed to reducing cash use, but in the Caribbean that’s not the case.

A CBDC offers a method by which all participants may reduce their reliance on cash and lower their overall transaction cost of participating in the economy.

There are varying definitions for financial inclusion across different Caribbean territories. In the case of the ECCB’s DCash, a specific product has been created with a lower barrier to entry in terms of identification requirements, but there are also lower transactional limits associated with the DCash wallet.

The motivations of any nation to go cash less will be different, based on their circumstances. Sweden is often refenced as a leader in achieving lower levels of cash usage, however, it has been at the forefront of researching retail system CBDC with the e-krona project. A statement in their recent paper on phase one of the e-kroner project identified their motivation as seeking to maintain influence in a payment system with increasing participation in private sector payment products that’s resulted in a decline of use of their main product, that is cash.

Interoperability is another key outcome expected of the ECCB DCash pilot in that the ECCB would ultimately like 3rd party wallet providers to test integration with DCash. Hence, I believe this is just the start in the Caribbean region and opportunities abound for payments services provider (PSPs) e-money issuers, e-wallets developers etc.

Q: What are the advantages of a CBDC in evolving the Caribbean region?

SB: Building and deploying CDBCs in the Caribbean raises the perception of what we are capable of on the global stage. This proves that we are evolved in terms of innovation, fintech and digital financial services. As a first mover, with two active CBDCs, we can build on this to develop a competitive advantage in this space. In the short to medium term, entities which are developing fintech capacity, can export professional services to other territories seeking to develop their financial services sector.

CBDCs involve various areas, including compliance, which can lead to the development of innovation in ways that more traditional financial institutions can participate in. For example, there are improvements for institutions in paying attention to advancements in tools to handle KYC (Know your Customer) and AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) as part of customer onboarding, ongoing compliance and risk management.

Looking beyond individual CBDCs, the possibility of lowering the cost and decreasing the time that cross-border transaction and remittances take is a goal that benefits the Caribbean region.

Q: Who are the key players in digital currency in the Caribbean region?

SB: You mean aside from Pinaka Consulting? 😉 NZIA, Bitt and eCurrency are the technology services provider for the Bahamas, ECCB and (the planned) Jamaica CBDCs.
It should be noted that the solution from eCurrency is not blockchain based and leverages existing payments system which can be of benefit in the deployment of the solution.

Q: When do you believe that an effective CBDC regime with cross-border capabilities might be implemented in the Caribbean and what preconditions would encourage it?

SBThe problems associated with cross border transactions are well defined and understood, but the willingness to establish a cohesive practical response that can be implemented is where things begin to unravel. The emergence of CBDCs in the Caribbean region does stimulate the conversation about the next possibilities.

Some research into the concept of a Caribbean Settlement Network has taken place via the IADB; however more effort may be required at the policy legal and regulatory level to advance this discussion.
A concerted effort by regional Central Banks at the forefront of CBDCs can assist this agenda, as they may be best positioned to test solutions here.

Testing of multi-CBDC arrangements is underway in four countries with individual CBDCs under test; Hong Kong, Thailand, United Arab Emirates and the People’s Bank of China (PBOC).

Q: Which country is most likely to go for an active CBDC next and why do you expect them to push for it?

SB: Right here in the Caribbean, Jamaica has announced their intentions to launch a CBDC and Haiti recently announced the name of their planned CBDC, Bitkòb.

Wider afield, the Bank of England has recently announced the establishment of a task force on CBDCs while Sweden’s Riksbank stated that e-krona might take another 5 years to develop. PBOC has launched their CBDC.

Many eyes are on the Bahamas and ECCB to gauge performance of CBDCs in a live retail payments environment. The world is watching us in the Caribbean and assessing the next move.

Q: What is required technically for a country to create an effective CBDC regime?

SB: A CDBC is not the only solution to increasing payments system efficiency, increasing digital payment options, and reducing cash usage.

That said, a country needs to assess its payments deficiencies, conduct its research and hold consultation with industry leaders to understand the pros and cons of the options they may consider to address these deficiencies.

These changes must be outlined at a national strategic level and bold goals to improve must be set. The ECCB did just this and followed through with the necessary execution to deliver the DCash product after two years of development.

About Shiva Bissessar and Pinaka Consulting.

Pinaka Consulting has been at the forefront of research of the Opportunities and Risks of Digital Currencies in the Caribbean region since 2014. Consultant Shiva Bissessar worked on the United Nations Economic Commission for Latin America and the Caribbean (UN ECLAC) study of regional digital currencies published in 2016.

Pinaka Consulting was selected via public tender as the Blockchain Technical Advisor to the Eastern Caribbean Central Bank (ECCB) in early 2019 to support its Central Bank Digital Currency (CBDC) project; DCash.
Bissessar has been involved from project inception and solution design stages to testing and implementation, while working closely with members of the ECCB Fintech Group and the technology services provider, Bitt.