IMF Advises Eastern Caribbean States to Trial Digital Currency

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IMF suggested that a digital currency underpinned by blockchain would boost the resources and capacity of the Eastern Caribbean Currency Union (ECCU), a region that comprises St Kitts and Nevis, St Lucia, Anguilla, Antigua, and Barbuda, Dominica, Grenada, and St Vincent and Grenadines.

Cautiously Trialing a CBDC is The Way, IMF Says

On Friday, the International Monetary Fund (IMF) published a Concluding Statement after it visited the ECCU region for a regular mission.

The fund concluded that the Citizenship by Investment (CBI) program was one of the key reasons why the region has recorded a growth in the gross domestic product (GDP) last year.

However, the IMF anticipates the GDP growth to gradually slow to 2.5%. This coincides with a long-term historical average for the ECCU. Also, CBI inflows might also slow. In the short-term, economic activity will be driven by tourism investment, some agricultural business projects, and further post-hurricane reconstruction. Three years ago, the Hurricane Irma and Maria hit the Dominican Republic.

In light of somewhat moderate projections, the IMF suggested the region to experiment with a common digital currency. The ECCU region is under the supervision of the Eastern Caribbean Central Bank (ECCB), which issues the Eastern Caribbean dollar.

Central Bank Digital Currency (CBDC) seems to be an unstoppable upcoming trend among major central banks. The Bank of England, European Central Bank, and Bank of Japan along with other counterparts, formed a group to study the benefits of CBDCs. Even the Fed admitted that it was thinking about adopting this innovation. IMF was among the first major institutions to forecast digital currency adoption by central banks.

St Kitts and Nevis Prepares the Ground

St Kitts and Nevis is already developing favorable conditions for a CBDC to be issued. The dual island country is building a virtual currency-oriented legal framework. At the end of last month, the jurisdiction passed the Virtual Assets Bill, which requires companies to register and pass due diligence verifications if they want to operate in the virtual asset space. This is in line with AML and CFT endorsed including by the IMF.

Premier Minister Timothy Harris, who also holds the role of Finance Minister, said that the new bill would perfectly fit the ECCB’s goal for a cashless society. He commented,

It is vital at this juncture that we embrace the opportunity to expand our capacities for adaptation to the swiftly changing realities of the technological spheres in which we find ourselves in this 21st century

Do you think that international institutions like IMF are testing CBDCs in small jurisdictions like the Marshall Islands and ECCU?

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