The Eastern Caribbean Central Bank digital currency, DCash, has been offline for over six weeks, but it is expected to resume in the coming days. We highlight three considerations and takeaways to be learnt from this experience.

 

From about mid-January 2022 and up to the time of writing, DCash, the Eastern Caribbean Central Bank (ECCB)-backed digital currency has been offline. The currency, which was launched in 2021, and had been rolled out in seven of the eight member countries of the Eastern Caribbean Currency Union (ECCU), namely Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines, has been unavailable for over six weeks.

DCash is the digital equivalent of the Eastern Caribbean Dollar, and is the second digital currency after the Sand Dollar, the Central Bank of Bahamas’ digital currency that has been rolled out, not just in the Caribbean region, but also worldwide. Further, and similar to the Sand Dollar, DCash is expected to address a number of challenges, including the following:

  • The relatively high cost of manufacture of hard currency
  • The relatively high cost of current payment methods and banking services
  • The financial inclusion of the unbanked and underbanked within the ECCU
  • Increasing the slow pace of commerce, by making financial transactions more timely and efficient.

Note: For more insight into DCash, listen our conversation with Sharmyn Powell, Chief Risk Officer of the ECCB

At the time of writing, and although DCash is available in most ECCU countries, it is still considered to be in the piloting phase. Further, and thanks to the pandemic, which has hindered the planned marketing  campaigns, take-up has been low, which relatively speaking, has limited the number of businesses and customers affected by the outage.

However, the unavailability of DCash has begun highlight some situations and challenges that merit further consideration.

 

Digital currency growing pains

The eyes of the world has been on the Caribbean region, thanks to its status as an early adopter and issuer of Central Bank Digital Currencies (CBDCs). Furthermore, the ECCB, with DCash, is the first monetary union worldwide to have rolled out a digital currency, which again made it the subject of careful study. However, the unavailability of DCash is a lesson to the world on setbacks that can occur when digital currencies are implemented, which was highlighted in a recent article in Bloomberg in which it was noted that, “Every country trying do a large rollout has had problems.”

To that end, it may be some comfort that since CBDCs are new, there is really no blueprint or cheat-sheet to help countries better manage, or avoid altogether, the technical challenges that can occur when CBDCs have been implemented. Hence, and into the future, as other countries issue CBDCs, there are likely to be hiccups during the implementation process, which eventually will inform best practice and protocols that countries and their central banks should adopt.

 

Reliability and resilience of CBDCs

With the limited take-up of DCash, and the prevalence and continued preference of cash for monetary transactions, reports have been that fallout from the DCash crash has been minimal. However, there is an expectation that over time, DCash, like all other digital currencies, will become the more preferred medium, thus reducing the need and expense associated with printing and maintaining hard currency.

However, and like all electronic forms of payment, digital currencies including DCash and other CBDCs have two fundamental vulnerabilities: the need for electricity and internet access. In the Caribbean region, and Eastern Caribbean countries in particular, which annually, and to some degree, experiences tropical storms and other adverse weather systems, electricity and internet access are among the first to be damaged when countries are hit by storms. Further, and depending on the extent of the damage, it can take weeks or even months before comprehensive service is restored, but it would be under these circumstances that a CBDC might be most needed and would be the most useful.

Further, and referring to the reason for the current DCash outage, which was due to an expiring security certificate on the HyperLedger Fabric hosting DCash ledger, it is likely that security certificates and platforms that underpin DCash may need to be upgraded from time to time. However, if DCash is to become a preferred mode of transaction in Eastern Caribbean countries, people need to feel confident that the facility will be available and functioning as and when needed. If there are questions about its reliability, it will undermine adoption, and consequently realisation of the objectives associated with introducing DCash in the first place.

 

Trust issues and fostering confidence

Finally, and noting that the DCash crash has been receiving global attention, once the currency comes back online, which may happen as early as the week of 7 March (Source: ECCB), the public may need more assurances of the safety and stability of the platform going forward.

In its press release issued on 3 March, the ECCB acknowledged that rolling out a digital currency has been and continues to be a learning experience. It also noted that following the initial interruption caused by the expiring security certificate, the Bank took the opportunity to undertake several upgrades, which delayed the platform being made live, but which should strengthen the platform, its security, and make it more resilient.

Although the press release is a good first step, the ECCB may need to consider ways in which it can foster confidence in DCash. In the future, being offline for six weeks would not only be untenable, but could be deleterious to the people and businesses that DCash is trying to help.

 

 

Images credit: ECCB (Facebook)