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Aruba, November 15, 2017 - Could we be getting closer to a blockchain-based, central bank-backed digital currency? Yes, but not in the way most people imagine.

The combination of technology, regulation and geopolitical shifts points to the emergence of a new type of digital asset: a cross-region blockchain-based currency.
Last year, Barbados-based startup Bitt announced the creation of a digital Barbadian dollar, a digital asset pegged to the value of its real-world counterpart and that could be traded on its blockchain platform. The news, while interesting, created little stir given the relatively insignificant size of the Barbados economy.
Now, however, other central banks in the region are joining the project – the platform will soon also handle Aruban florins and Bahamian dollars.
Given that the three currencies are pegged to the US dollar (although at different rates), switching from one to the other is a simple equation. And a smooth interchangeability would reduce friction and boost trade between the islands.
Sorely needed boost
Caribbean economies are being hit hard by the ‘de-risking’ of commercial banks. The US State Department has identified several of the islands’ financial systems as havens for money launderers, which increases the costs for banks maintaining branches there. Given the relatively small size of the economies, many international banks are pulling out of the region, cutting off access to foreign currencies.
This especially affects the region’s less-well-off, given their dependence on remittances, and pushes the economies into a downward spiral: the banks pull out because the islands are poor, which makes them poorer still.
At CoinDesk’s Consensus 2017 conference this past week, Ryan Peterson of the Central Bank of Aruba quantified the potential benefit:
“We did a calculation for the economy of Aruba, and this could potentially lead to a 4–5% GDP growth. Now that, for a region that hasn’t seen 0.5% growth in over two decades, is tremendous.”
As a more fluid flow of local currencies provides a welcome relief to small businesses starved of working capital, other regional central banks are likely to take note.