June 27th 2019, Bridgetown, BARBADOS – The Caribbean Development Bank (CDB) recently hosted the launch of a Working Group of regional stakeholders, tasked with determining the feasibility of establishing the ‘Caribbean Settlement Network’ (CSN) – a proposed regional public good, which intends to resolve the decades-long challenge of cross-border trade and remittance settlement among Caribbean nations. Upon the realization of this not-for-profit regional public entity, Caribbean residents and businesses would be able to conduct intra-regional crossp-border digital financial transactions instantly on their smartphones or tablets, using digital versions of their local currencies, at a fraction of the current cost of wire transfers and remittance channels.
Currently, almost every intra-regional financial transaction, from the individual to business and governmental, involves the use of various correspondent banks, since these transactions are conducted and settled in foreign currencies via the international banking system. This process incurs significant fees, and can take several days. The de-risking phenomenon has only exacerbated the existing challenges associated with cross-border settlement via the conventional international financial settlement system.
Between the late 1970s and the early 1980s, the short-lived CARICOM Multi-lateral Clearing Facility (CMCF) eliminated most of the correspondent banking challenges that plagued intra-regional trade settlement. That agreement facilitated direct trade settlement between the member states and worked well until difficulties arose and the system was disbanded. While the CMCF framework dissolved, the need for secure, efficient, and cost-effective intra-regional trade and remittance settlement still exists.
The CSN is therefore a new-age solution to a historical need to resolve long standing intra-regional trade settlement challenges.
The purpose of the Working Group is to drive consensus-based decisions regarding the structure and implementation of the CSN, by bringing together major stakeholders and subject matter experts, including academics, regulators, governments, multilateral institutions, regional institutions (Caricom, Cariforum, CSME, Capri, etc.), the financial services sector, and fintech entities, to deliberate and agree on a roadmap for establishing the CSN.
In stating the role of individual Working Group members, Dr. Justin Ram, Director of Economics at the CDB outlined: “Members of the working group will participate on a voluntary basis by invitation (based on consensus) and contribute to the goal of creating the CSN. The contribution of each member of the working group will be agreed, based on their individual/organization’s resources, time and expertise. All commitments will remain transparent to all members at all times, to encourage collaboration, avoid duplication of effort, and to promote accountability. It is just the start and we expect more regulators and interested parties to be invited to become members and be a part of this exciting initiative.”
The working group of the CSN, which also includes global blockchain and financial technology experts from Bitt Inc, discussed the Working Group’s proposed legal structure, and that of the CSN, as the immediate next steps to establish the CSN as a regional public good.
With reference to the FinTech sandbox in Barbados and the Eastern Caribbean Central Bank’s (ECCB) central bank digital currency (CBDC) pilot with Bitt Inc, the working group acknowledged the region’s desire to be a global leader in cross-border digital payments, and aspires to establish the CSN by 2020.
If you would like more information about this topic, please call Marla Dukharan at +1 (246) 231 -2115 or email [email protected]