CAPSS Milestone: Redefining Trade, Innovation, and Financial Sovereignty in the Caribbean — Opportunity for AfCFTA

On May 23, 2025, the Caribbean achieved a breakthrough moment that could redefine the trajectory of intra-regional trade, financial inclusion, and digital innovation across Small Island Developing States. The Caribbean Community's central bank governors, under the leadership of the Centrale Bank van Curaçao en Sint Maarten, unanimously endorsed in principle the Caricom Payment and Settlement System (CAPSS).

The endorsement signals a transformative leap: a shift from historic overdependence on foreign currencies like the US dollar toward real-time, local-currency cross-border transactions backed by central banks across CARICOM. More than a technical milestone, CAPSS represents a paradigm shift in regional cooperation, financial resilience, and innovation leadership.

The Cost of Fragmented Payments

Across CARICOM, cross-border trade has long been constrained not by lack of demand or opportunity, but by a structurally inefficient payments landscape. Over 52% of intra-CARICOM transactions involve the US dollar, per the World Bank, leading to high costs, delays, and liquidity loss from local financial systems. Correspondent banking relationships in the Caribbean have declined 25% over the past decade, per the IMF, increasing the cost of doing business. CARICOM countries collectively spend over $3 billion annually securing hard currency to settle regional trade obligations, and intra-CARICOM trade remains low — an estimated 16% of total trade volume, compared to 68% in the EU and 52% in Asia, per UNCTAD. A major cause is payments friction and a lack of monetary interoperability.

CAPSS, by enabling instant settlement in local currency across borders, addresses all three problems directly — removing friction, lowering costs, and reducing the demand for US dollars in daily transactions.

Modeled on Africa's Own PAPSS

CAPSS is modeled after the Pan-African Payment and Settlement System, launched by Afreximbank and piloted across six countries in the West African Monetary Zone. Since its 2022 rollout, PAPSS has processed over $500 million in transactions, creating precedent for scalable, interoperable, sovereign-led payment systems. Key lessons CAPSS is now adapting: central-bank-backed trust (settlement occurs through central bank accounts, eliminating reliance on private intermediaries), currency retention (local currency stays within the domestic economy), and API-enabled infrastructure that expands reach through fintechs, commercial banks, and telcos.

In February 2025, a successful proof-of-concept transaction between the Central Bank of Barbados and the Central Bank of The Bahamas demonstrated real-time, cross-border settlement in local currencies — no intermediary, no delay, no SWIFT transfer. "This is the future of regional trade," said Dr. Kevin Greenidge, Governor of the Central Bank of Barbados. "A trader in Trinidad can pay in TT dollars; the Barbadian exporter receives Bajan dollars instantly. Reserves are managed between the central banks, and net settlements can occur periodically in USD only if necessary."

Trade Implications: Scaling Regional Commerce

With over $4.3 billion in regional trade potential left untapped annually due to inefficient payment systems, per the Caricom Secretariat, CAPSS unlocks a wave of opportunity. For SMEs and micro traders — over 80% of businesses in CARICOM — this is a game-changer: liquidity constraints, delayed payments, and high forex conversion rates are among the top three barriers to cross-border commerce in the region, per the Caribbean Development Bank. CAPSS is not just a payment system; it is the rails upon which digital trade, e-commerce, and fintech innovation can thrive.

The CBCS meeting also endorsed a regional e-KYC and CDD platform for customer onboarding interoperability, a $200M regional bond facility to finance climate-resilient infrastructure through the CARICOM Development Fund, and a regional green taxonomy co-developed with the World Bank and IFC. Taken together, these initiatives reveal a coherent strategy: build the enabling infrastructure for a digitally connected, financially inclusive, climate-aligned Caribbean.

In a world where financial systems are becoming more fragmented, regional integration anchored in sovereign payment systems is no longer a luxury — it is a necessity. The CAPSS milestone is not just about clearing payments; it is about clearing the path for a new Caribbean economy. It is now up to policy leaders, financial institutions, entrepreneurs, and citizens to ensure this opportunity is not squandered.

Originally published on LinkedIn: https://www.linkedin.com/pulse/capss-milestone-redefining-trade-innovation-financial-akugri-87ete/