The Central Bank of The Bahamas, which launched the world’s first digital fiat currency in 2020, is now considering a mandate for commercial banks to support its central bank digital currency (CBDC) – the “Sand Dollar.” The Bahamas has set a two-year timeline for full integration of the CBDC into the banking systems, aiming to promote widespread adoption across the nation’s financial institutions.
Mandatory Integration and IT System Upgrades
Commercial banks in the Bahamas are required to update their IT systems to accommodate the Sand Dollar, a move seen as essential for boosting adoption and facilitating mobile payments. John Rolle, Governor of the Central Bank, emphasized that institutions are being urged to comply with these regulations. “We’ve begun to signal that to our institutions,” he said. “We foresee a process where all of the commercial banks will eventually be in that space and they will be required to provide their clients with access to the central bank digital currency.”
Industry Resistance and Potential Benefits
Despite the mandate, some industry players argue that digital fiats like the Sand Dollar do not currently offer significant advantages over existing payment methods. However, Rolle believes that integrating Sand Dollar payments will pave the way for small vendors, such as local restaurants and businesses, to accept it as a mode of payment, potentially revolutionizing the local economy.
Current Circulation and Adoption Challenges
As of March, Shaqueno Porter of the Central Bank of The Bahamas reported that the Sand Dollar’s circulation stands at $2.1 million, representing less than 1% of the total cash in circulation. Although 120,000 CBDC wallets have been opened in a population of just over 400,000, the presence of multiple proprietary wallets has caused confusion among customers. The central bank has found it necessary to educate users that the Sand Dollar functions uniformly across all wallets.
Expanding to Tourists
To further boost adoption, The Bahamas has also opened the CBDC to tourists visiting the island nation. Last year, the country welcomed nearly six million visitors in the first seven months alone. In a bid to facilitate easier transactions, the nation has exempted tourists from the Know Your Customer (KYC) process for smaller Sand Dollar transactions.
Looking Forward
With this mandate, The Bahamas aims to position itself as a leader in digital currency adoption. The central bank’s directive for commercial banks to fully integrate the Sand Dollar within two years is a significant step towards creating a more efficient and inclusive financial system, benefiting both residents and visitors alike.
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