A common Caribbean Community (CARICOM) currency – a long-elusive dream of the larger territories in the regional integration movement – remains a possibility, two central bank governors said today. But they said the move would require identical monetary policy and fiscal rules among member states as well as increased intraregional trade.
But in holding out for a CARICOM dollar, Bank of Jamaica (BOJ) Governor Richard Byles also suggested a common financial technology (fintech) space for the region is worth examining.
He was responding to questions from journalists on Thursday during an official announcement that Jamaica had launched its regulatory sandbox 18 months after Barbados introduced its own space to live test financial products, services, and delivery systems. The sandbox allows for the innovations to take hold while strictly containing the risks to financial consumers and the financial system.
But Byles stopped short of giving support for a common currency, but told Barbados TODAY “it is something that we would all desire conceptually”.
He said: “It would have to sit on a foundation of harmonized monetary and fiscal systems. So all the territories would have to subscribe to a similar, if not, the exact monetary policy and some fiscal rules concerning how they operate.”
Governor of the Central Bank of Barbados Cleviston Haynes also stopped short of agreeing that a common currency would be ideal but said while Bridgetown was a “firm believer” in CARICOM and its mission, the idea of a common currency would require an increase in trade among member states.
Said Haynes: “There is an extent to which increased trade and the common currency will perhaps go hand-in-hand. The truth is that we don’t have a lot of CARICOM intra-regional trade. The common currency is designed to help reduce the transaction cost as we move from one island to the next, and it is always a chicken and egg situation.
“But I argue that the absence of substantial trade flows has meant that the need for a common currency is not as pronounced as it would be if we had a lot more trade flows within the region. So we have to work towards getting increased trade flows. There might be those who may argue that if you had the common currency you would get more trade flows, but I think it would work the other way.”
Pointing to the European Union’s experience, Byles stressed that despite a level of disparity in development among member countries a common currency would require discipline among each country to stick to a particular monetary policy.
Byles said: “So it is possible because Europe is quite diverse, but it exists there. So it is possible in CARICOM also. We just have to agree on that harmonised monetary policy and a responsible fiscal policy throughout all the territories.”
Central banker Byles said that with Jamaica focusing heavily on its economic issues in recent years, the idea of a regional fintech solution for the unbanked and underbanked had taken a back seat, and he suspected that was the case for other CARICOM member states.
However, he said even as CARICOM member states are at “different levels of focus”, there was room for cooperation in that space and it was worth pursuing.
Byles said so far Jamaica has reached out to the Bahamas and Eastern Caribbean countries “to see what their experience has been like and to learn from it”.
“So that is how I think CARICOM will proceed. Each person focusing on the issues that are crucial to them and then we share that learning amongst each other,” said Byles.
The sandbox, which is opened to BOJ regulated entities including commercial banks, building societies, cambios, remittance service providers, securities dealers and fintech companies once they partner with a deposit-taking institution, has so far received interest from four companies.
The sandbox framework was introduced on March 16, following discussions in May last year and the subsequent signing of a memorandum of understanding between the BOJ and regulatory bodies in Kingston.
Officials explained that the companies, once approved, would have up to two years in the sandbox regime, and if new legislation was required it would be developed during that time.
Barbados introduced its sandbox in October 2018, and after eight months in the sandbox framework with its mobile wallet mMoney, the fintech firm Bitt graduated, and related legislation is being developed.
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