- The sovereign currency, backed by the Bahamian Dollar on a ratio of 1:1, is dubbed ‘the Sand Dollar’.
- The nationwide rollout results from successful pilot tests of the digital currency in two islands starting late last year.
- Transacting with the Sand Dollar is irrevocable and will be done using Payment Service Providers (PSPs)
The Caribbean nation of Bahamas has confirmed that it will roll out its Central Bank Digital Currency (CBDC) nationally in October. According to the publication, the Bahamas started pilot tests of the digital currency in the islands of Exuma and Abaco in December 2019.
The Central Bank of Bahamas believes that the sovereign currency will help make payments easier across all the islands, especially those that are far away. Chaozhen Chen, the assistant manager of eSolutions at the country’s central bank, stated:
A lot of residents in those more remote islands don’t have access to digital payment infrastructure or banking infrastructure. We had to customize the effort and the solution to what we need as a sovereign nation.
The Sand Dollar
The digital currency is dubbed ‘the Sand Dollar’ and will be backed by the country’s Bahamian Dollar at a ratio of 1:1, which is pegged on the US Dollar. At the moment, there are only $48,000 worth of Sand Dollars in the monetary authority’s balance sheet. Chen was quick to add that new Sand Dollars will be released as the demand increases. It will only happen as the Bahamian Dollar is removed from circulation to prevent the process from harming the country’s monetary policy.
The pilot tests were done using Payment Service Providers (PSPs), who made the payment process straightforward. According to Keith Davies, the CEO of Kanoo, which was one of the PSPs, a transaction involving the Sand Dollar is irrevocable since it’s similar to using fiat currency. He stated:
Trading is easy, but settlement is hard. Unlike conventional PSP transactions, once a Sand Dollar transfer happens, it’s final and irrevocable because it’s fiat currency. It is the essence of a settlement system.
Growing adoption of CBDCs
A report by the International Bank of Settlements indicated that over 80% of central banks worldwide were exploring the issuing of digital currency. China recently launched pilot projects to test its digital yuan, while 40% of the banks are still in the conceptual stage. The CBDCs have become popular as governments look for ways to ensure a stable fiat and regulate virtual currencies in their countries.