CaribCoin's plan for regional financial settlement

BitDepth #1411

Mark Lyndersay

AT THE Caribbean Telecommunication Union's recent webinar on the potential for a complementary currency in the Caribbean, the challenges involved in establishing a regional settlement network commanded the discussions.

Gabriel Abed is listed as "Visionaire" of CaribCoin, a new effort to establish a complementary currency to lubricate regional trade in the Caribbean.

In his presentation, Dr Leander Bindewald pointed out just how mercurial the concept of money is.

While the official definition of money is a medium of exchange through coins and banknotes, the modern virtualisation of money transfer, in which vast sums are transmitted as bits – essentially exchanging promises to pay between financial institutions – calls that into question.

Bindewald, a strategy consultant at Monneta, a monetary think-tank, describes money as "A social institution, like a government or a game, has defined rules. You have to play by the rules if you want to play in the game."

In the evolving understanding of how value is measured and traded, Bindewald's suggestion that money should now be considered a token of value, "a system of transferable units that facilitate collaboration in a community."

To understand how a complementary currency might improve value transfer in the Caribbean, it’s worth considering what a complementary currency is.

The idea isn't new. A token in a game park is a form of complementary currency. Within the park, it exchanges cash value for a denomination that has value only within the boundaries of the space.

CaribCoin is being introduced as a way to facilitate trade and payment within the Caribbean but it requires mutual agreement between nations to accept it as a token of value.

Why? Because trade within Caricom is calculated and managed using the only common currency that's accepted throughout the region, the US dollar.

Hard numbers on regional trade aren't readily available after 1998, when it peaked after four years of increases at US$1.1 billion or 15.5 per cent of overall exports from countries in the region.

Making this trade happen requires the participation of correspondent international banks, which have not been shy about derisking islands for failing to meet international accounting standards.

CaribCoin is looking for ten to 15 companies doing business between Barbados and Jamaica to do a pilot project demonstrating how the technology would work in practice.

TT, Jamaica and Barbados were the three leading exporters to the Caricom region by a wide margin.

According to Dr Jan Schroeder, the founder and chief systems architect of the company, "We're preparing our so-called MVP, the minimal viable product. What we're setting up at the moment is the technical infrastructure and the web apps to securely buy, sell, store, issue and transfer Carib dollar."

"We're setting up a governance structure to ensure stability of Carib dollar in collaboration with the CTU and creating a two-tier distribution system relying on existing payment service providers."

"Half of the year, there's not enough US dollars in the region (for everyone to) get (their) hands on it."

The goal, according to Schroeder, is to provide an alternative to a region suffering from high USD liquidity dependence and low supply by offering a product that works without intermediaries, enables low-cost and nearly instant cross-border transactions and settlements between businesses.

To do that, it will require the participation of trusted Payment Service Providers, acceptance by all Caricom member states and an agreement to exchange the coin against any national currency.

This is not a new idea. The Caricom Multi-lateral Clearing Facility ran for less than five years, collapsing in 1983.

In 2019, BITT was working with the Caribbean Development Bank to establish the Caribbean Settlement Network.

Regional currency parity was on the agenda of an MOU that Barbados' PM Mia Mottley signed with the African Export-Import Bank (Afreximbank) in 2021.

In February, WiPay established the WiCoin Settlement Network with an emphasis on remittance transfers. It is working to link Latin America with Africa, despite early announcements of a Caribbean initiative (https://bit.ly/46jwtrA).

If this all seems a bit confusing, it's because it is.

"It's not (always) a clear-cut thing that one project is a currency and the other project is a payment system," said Bindelwald.

"That is kind of a fluid thing and sometimes at least with payments and the issuance of currency, you have to do both simultaneously."

Given the appalling state of the Caricom Single Market Economy (CSME) after 21 years, getting the Caribbean to agree on regional settlement, even targeting business transactions, will demand Sisyphean effort.