Growth & Jobs | The future of money: The 101 on digital currencies | News

GIVEN THE recent launch of the Bank of Jamaica’s (BOJ) digital currency pilot project and the general positive performance of cryptocurrencies on the world market, many Jamaicans have taken an interest in the new and modern method of exchange.

However, there are many persons who may still not understand the concept of cryptocurrencies and central bank digital currencies (CBDC), and what this move by the BOJ means for the ordinary citizen.

Here’s the 101 on digital currencies:


Ricardo Dystant, chief of digital transformation and special projects at JN Bank, explained that digital currency, similar to cash, is a method of payment or a medium of exchange, except in a digital form. He further informed that some digital currencies are regulated, as in the central bank digital currency, while others are unregulated, such as bitcoin, which is a cryptocurrency.


Dystant explained that all cryptocurrencies are digital currencies, but not all digital currencies are cryptocurrencies. In essence, digital currency is an overarching term that can be used to describe different types of currencies that exist in the electronic realm. Broadly, there are three different types of currencies: cryptocurrency, virtual currency, and central bank digital currency (CBDC).Virtual currencies are unregulated digital currencies controlled by developers or a founding organisation consisting of various stakeholders involved in the process.

“Cryptocurrencies are unregulated and decentralised, which means they do not have the backing of a government or central bank. Some people may find this attractive, but for others this might be a downside, because cryptocurrency rates are highly volatile,” the JN Bank executive remarked.

Dystant noted that bitcoin and other cryptocurrencies have been quite unstable throughout much of their history. For example, reported that while bitcoin traded at close to US$20,000 in December 2017, its value dropped to as low as about US$3,200 a year later.

However, by December 2020, it was trading at record levels again.

According to market research website, more than 17,000 different cryptocurrencies are traded publicly, with the most popular being bitcoins. Others include ethereum, tether, BNB and USD coin. The total value of all cryptocurrencies as at the end of January 2022 stood at about $1.7 trillion, having fallen substantially from an all-time high of above $2.9 trillion late in 2021.

“On the other hand, CBDCs are essentiallyelectronic forms of currency issued by the government or a central bank of a country, for example, the BOJ,” 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, and [these] currencies are globally accepted,” 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 services.


While some cryptocurrencies, including bitcoin, are available for purchase with US dollars, others require that you pay with bitcoins or another cryptocurrency.

To buy cryptocurrencies, you’ll need a ‘wallet’ — an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as bitcoin or ethereum.

As it relates to CBDC, the method of purchase is similar. Dystant explained that a digital wallet is like a bank account that holds the value of your cybercash.

“The wallet provider can issue you an app for your mobile device, or you can log onto a website to access your account. You can then purchase your electronic money by using a credit card,” he informed.


Dystant noted that among the advantages of electronic currencies are that they enable seamless transfer of value and can make transaction costs cheaper.

Digital currencies also enable instant transactions that can be seamlessly executed across borders. For instance, it is possible for a person located in the United States to make payments in digital currency to a counterparty residing in Singapore, provided they are both connected to the same network.

Dystant pointed out that because digital currencies generally exist within the same network and accomplish transfers without intermediaries, the amount of time required for transfers involving digital currencies is extremely fast. “As payments in digital currencies are made directly between the transacting parties without the need for any intermediaries, the transactions are usually instantaneous and low-cost,” he said.

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