Four Caribbean central banks are set to launch a pilot project to develop an alternative payment system aimed at reducing reliance on the US dollar for trade and remittances.
Spearheaded by the Eastern Caribbean Central Bank (ECCB), the Caricom Payment and Settlement System (CAPSS) seeks to transform cross-border transactions and will eventually link to Africa’s Pan-African Payment and Settlement System (PAPSS), established in 2022.
The pilot will initially include Barbados, The Bahamas, ECCB member states, and one additional country to be confirmed. ECCB Governor Timothy Antoine announced the initiative last week at the Africaribbean Trade and Investment Forum in Grenada.
“I’ll allow the other country to confirm when it is ready to do so,” said Antoine. “Once we complete the pilot, we’ll look at scaling it up.”
Designed as a real-time, low-cost platform operating in local currencies, CAPSS mirrors PAPSS, a centralised system developed by Afreximbank and the African Union to enable secure, real-time cross-border payments in local currencies across Africa. The African platform currently connects central banks, commercial banks, and payment service providers in countries including Nigeria, Ghana, Kenya, Egypt, and Rwanda, among others.
The Caricom adoption of the model is intended to facilitate regional trade and remittances in local currencies, bypassing costly and often unreliable correspondent banks in the United States.
“We cannot continue to rely on correspondent banks, particularly those from the US,” Antoine said.
Through CAPSS, transactions — such as from Grenada to Guyana — could be settled in Eastern Caribbean and Guyanese dollars, with central banks and the African Export-Import Bank serving as settlement agents.
“In day-to-day transactions, traders will be trading in local currencies. That, we believe, is a potential breakthrough,” Antoine noted.
Phase one will focus on Caricom, with phase two expanding to African countries, enabling direct currency exchanges between the two regions. “Charity begins at home – phase one. Then, in phase two, we pivot to the motherland,” Antoine added.
The pilot builds on a successful proof-of-concept earlier this year between the Central Bank of Barbados and the Central Bank of The Bahamas. The ECCB is now working with the Committee of Central Bank Governors to expand the system regionally and eventually link it internationally.
“This is a concrete example of leveraging our shared pain for shared prosperity,” Antoine said, thanking Afreximbank for laying the foundation for CAPSS.
“I want to be clear: while background settlements will still involve US dollars between central banks, the day-to-day transactions will use local currencies – a key innovation with broad potential,” he emphasised.
