As the two largest originators and recipients of payments, the Public Treasury Department and the National Insurance Board are being invited to participate in The Central Bank of The Bahamas’ (CBOB) Real Time Gross Settlement System (RTGS) and the commercial banks’ Automated Clearing House (ACH), Governor of the CBOB John Rolle said yesterday.
Rolle, who was speaking at the CBOB’s Blockchain Seminar, said this will be part of several legal and policy reforms that the central bank will target in the near term as it seeks to modernize transaction processes within the financial sector.
Rolle added that the CBOB will also “promote direct participation of credit unions and non-bank payment service providers in the payment and settlement system”.
“This would apply to the retail and wholesale parts of the system, the ACH and RTGS,” he said.
“The new draft Central Bank Bill provides that all of these entities will be allowed to maintain accounts settlement with the central bank to clear payments.
“Under the Payment System Act, the bank will pursue further regulations to strengthen consumer protection provisions, along evolving best international standards. Once formulated, these would apply to savings and checking accounts, debit and credit card facilities, as well as stored value products, where the common thread is the actual or potential use of such facilities to effect payments.
“Mechanisms will also be explored to determine how international banks might participate directly in Bahamian dollar payments and settlements, to facilitate their own local needs or those of clients who maintain a nexus to the local economy.”
Meantime, Rolle expanded on the central bank’s Project Sand Dollar, an initiative to create a digital currency and run a pilot program for the use of that currency. He said the CBOB is waiting to conclude its engagement with NZIA, the technology company identified to develop the digital dollar program, so that the pilot project can begin in earnest.
“There are some design features of a digital Bahamian currency that are intended to reflect the central bank’s role as a sponsor of financial sector development. We consider the general use of digital currency as a public good,” he said.
“Because of geographic fragmentation, we cannot be assured that the private sector, acting alone, would achieve the level of inclusion and access that all communities in The Bahamas deserve.
“This instrument is intended to complement existing bank services, not replace them. Its use will be optimized so that persons in remote communities can deploy it to establish and maintain deposit accounts and other services at banks.”
Rolle said the CBOB expects digital wallets to be integrated with commercial banks, or authorized sellers of foreign exchange in order to give wallet holders access to foreign exchange services.
He added that in the future the central bank will likely relinquish its provision of front-end solutions and simply maintain the ledger for the digital currency.
According to Rolle, the CBOB will fashion its framework on established international standards, “and take full advantage of technical assistance from the network of like-minded peers and supportive agencies”.
“The payment system modernization initiative provides both the incentive and means to spur more widespread adoption of electronic payments, and to enable greater access to digital financial services,” said Rolle.
“Transactions cost reduction must also be measurable. Ultimately, this means approaching 100 percent access to digital services, full possible access to banking services of a deposit maintenance nature, and the fully enabled embrace of electronic payments capabilities. Reducing the size of legitimate but unrecorded economic activity will also be necessary, and micro, small and medium-sized businesses will need to be admitted into the digital space.”
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