The island state of Bahamas plans to introduce its new digital central bank currency in October. This would make it the first country in the world to fully integrate and implement the system.
The CBDC will primarily integrate disconnected islands that are poorly networked with commercial banks. Anyone with a smartphone can use the coin.
The digital currency is pegged 1:1 to the Bahama Dollar and the same regulatory rules apply. If new digital coins are issued, cash is collected.
Already in 2018, the island state of Bahamas announced its intention to introduce its own digital central bank currency (CBDC). At that time, it was said that „commercial banks would be downsized and withdrawn“ and „communities would no longer be offered services“. After two years, it now seems that the time has come. The digital fiat currency „sand-dollar“ will be able to be traded throughout the state in October, according to regional reports. This puts the Bahamas ahead of everyone in this development, including the world’s superpowers including China.
Digital currency as a bridge for integrating the disadvantaged
The Sand-Dollar was already tested in 2019 on the islands of Exuma and Abaco as part of a pilot project. Chaozhen Chen, Deputy Head of eSolutions at the Central Bank of the Bahamas, emphasized to Bloomberg the advantages of integration over remote islands:
„Many residents on these more remote islands do not have access to a digital payment or banking infrastructure. We had to tailor our work and the solution to what we really need as a sovereign nation.“
Since only a small part of the state’s more than 700 islands is inhabited, commercial banks withdrew more and more. Hurricane Dorian also brought many banks to a standstill last summer. This means a disadvantage and exclusion of a substantial part of the population from the national banking system. It is also a blockade for tourism on the isolated islands.
Through the CBDC, the remote islands are to be integrated, since transactions can be carried out from smartphones. By 2017, 90% of the population in the Bahamas already owned a smartphone.
Experience shows that the telephone network should be able to function again quickly even in the event of natural disasters. A simple compatible wallet on the smartphone is sufficient to use the digital currency. This should enable users to carry out transactions offline.
What exactly is the Sand-Dollar?
Chen also announced that the central bank currency is regulated according to the Bahama-dollar. The rules for anti-money laundering and identity verification procedures also apply to the introduction of wallets of the digital currency. And the CBDC is pegged to the Bahama-dollar and the Bahama-dollar is pegged to the US dollar.
The digital currency is always issued parallel to the standard currency. This means that the number of issued sand dollars is deducted from the cash transaction. This is how the circulation of money is to be regulated. New digital dollars are issued as demand grows.
The Sand-Dollars, which incidentally also correspond to the name of a sea urchin class reminiscent of silver coins in appearance, are thus not cryptocurrencies in the true sense, which prioritize anonymity and decentralization, but pure digital fiat money.
With the introduction of its CBDC in October, the Bahamas would be the forerunner in this area, ahead of all other states. It remains to be seen to what extent the sand dollar will prevail, which will above all require growing acceptance among the population.