Overview:
On 31 March 2021, Eastern Caribbean Central Bank (ECCB) launched DCash(Digital Cash), the world’s first retail central bank digital currency. The ECCB did a pilot DCash in the eight independently sovereign member countries of the Eastern Caribbean Currency Union (ECCU): The islands of Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines.
DCash became available to Grenada’s 112,000 residents on March 31, 2021. DCash was the first central bank digital currency to be introduced in a currency union.
DCash is government issued and pegged to the national currency, making it more immune from the speculation that has roiled other digital assets like Bitcoin and Luna.
Motivations:
1. Financial Inclusion
The DCash facilitates financial inclusion by providing a solution that eliminates the need for individuals to possess an account with a traditional financial institution like a bank or credit union. Instead, these individuals can acquire a value-based wallet (VBW) from an agent authorized by the ECCB.
2. Payments system efficiency
DCash is claimed to be a safer, faster, and cheaper way to pay for goods and services, or send funds to other DCash holders. At present, the final settlement of cheques, card payments and wire transfers, can take up to three days. In contrast, the settlement of DCash payments and transfers is near instantaneous.
One big advantage of DCash is the significant reduction in the cost of financial transactions. As table below demonstrates, the cost of transacting, and by extension the cost of doing business, using existing payment channels is relatively high.
3. Cash Stealing Crimes
In contrast to physical cash that can be easily taken or misplaced from a wallet, purse, pocket, or any physical location, digital cash is immune to loss or theft. From a business standpoint, having less physical cash greatly minimizes the risk of losses due to robbery or theft, particularly during busy periods when cash flow is high.
4. Cash Reduction
The ECCB aims to reduce the use of cash by 50% by 2025.
5. Better Financial Management
DCash users can track all of their expenditures in the app. Users will no longer wonder where their money went or was spent. This empowers DCash users to monitor and track all their expenses effectively.
Design Considerations:
The solution enables ECCB to mint, issue, redeem and destroy the digital Eastern Caribbean dollar. DCash is issued to the financial institution, and the financial institution distributes it to their customers, on demand. DCash is built as a non-interest retail instrument with holding limits to mitigate the disintermediation risk. One can redeem DCash for cash at participating merchants or transfer it to an account balance at any participating financial institution.
DCash eliminates the need for a bank account and does not impose any minimum spending amount or minimum balance requirement. Individuals who hold accounts with participating financial institutions will have a registered-based wallet (RBW). In this case, the specific threshold is not predetermined but rather determined by their respective financial institution, taking into consideration the individual’s existing profile.
The DCash Merchant app allows businesses to manage both consumer and b2b transactions, vendor payments, e-commerce, and internal cash/DCash management.
Existing Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) protocols are strictly observed with the solution deployed.
Solutions:
ECCB has partnered with Bitt’s to design and develop a CBDC solution. It makes use of IBM Hyper-ledger fabric which is a private permissioned-based solution where all participants must be pre-authorised.
Results:
12 months after the launch of the DCash pilot project, the user base of the DCash payments platform had grown to more than just 4,000 wallet holders across the 8 regions. The governor acknowledged that DCash suffered from a lack of marketing, which the ECCB is hoping to improve over the next 12 months. A marketing agent has been roped in to assist in better promoting the digital currency throughout the eight member territories.
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