UN ECLAC Recommends Caribbean Authorities To Explore Digital Currency Technology

Digital currencies such as bitcoin and their underlying distributed ledger technology have become the most talked about topics in the financial sectors recently. While a number of conferences are being held that explore the technology, several reports on the subject also being published that provides insights from industry experts.

A new report from the UN Economic Commission for Latin America and the Caribbean (ECLAC), entitled “Opportunities and risks associated with the advent of digital currency in the Caribbean” is the latest addition to this list.

Authored by Shiva Bissesar, consultant of the Caribbean Knowledge Management Centre (CKMC), ECLAC, the report examines the usage of digital currency technology in the Caribbean subregion with a view to draw attention to the opportunities and risks associated with it and explores how it could address subregional deficiencies in the electronic payment infrastructure.

In addition to explaining the basic concepts relating to bitcoin and blockchain technology, the report also draws attention to regulation and legislation (New York BitLicense, US FinCEN, Canadian Legislation); cites reports on the subject by the European Banking Authority (EBA), the Bank of England; discusses taxation rules and much more.

“Given the deficiencies in subregional payment infrastructure, and the broader need to increase participation in the digital economy, it is incumbent upon Caribbean authorities…to examine the opportunities for innovation that digital currency offers”, the paper reads and recommends that “authorities in Caribbean countries embark on an inclusive approach to the exploration of digital currency that provides sufficient opportunity for public input and policy review similar to the process adopted by the United Kingdom”.

It pointed out that the Organization of Eastern Caribbean States (OECS), with its shared Central Bank and history of cross-national collaboration, is also well-positioned to play a leading role in the implementation of common institutional framework for managing the regulatory issues surrounding digital currencies and mobile money solutions.

The report also acknowledges the fact that given the “unfortunate” history of the Caribbean region as the centre of money laundering activity, regulators are concerned about the potential use of digital currency for such purposes. It therefore suggests the authorities to take careful note of the Financial Action Task Force (FATF) recommendations, without causing undue difficulty to Caribbean innovators.

“To achieve this balance, they will need to engage proactively with the companies in the FinTech industry, which are positioned to the first line of protection in combating digital currency-based money laundering”, it added.

In this context, the report pointed out that digital currency companies in the Caribbean subregion are already taking proactive action by voluntarily engaging third-party services for money laundering/know your customer (AML/KYC) verification.

The report concluded saying, “advent of digital currency technology represents an opportunity for Caribbean countries to revise this process and to demonstrate that innovation has an equal place at the table in the consideration of national priorities”.