The project started in December and is expected to be launched nationwide by October
The Bahamas may become the world’s next country to launch a virtual currency backed by the state nationwide, following an announcement on its central bank digital currency (CBDC).
Chaozhen Chen, assistant manager of e-Solutions at the Central Bank of the Bahamas, revealed to Bloomberg that the digital currency is meant to help push for better financial inclusion within the remote islands across the archipelago nation.
Chen explained that many residents in far-flung islands do not yet have access to digital payments or banking infrastructure.
“We really had to customize the effort and the solution to what we need as a sovereign nation,” he explained.
The digital currency, which has been dubbed “Sand Dollars”, can be transferred through mobile phones. This is a feature that is sure to fit with the Bahamian population, 90% of which are using mobile phones as of the year 2017.
Chen added that the CBDC will also be subject to the same regulations as the Bahama dollar. Users will still undergo anti-money laundering (AML) and know your customer (KYC) protections while they create their accounts to access the virtual currency.
As demand grows, new digital dollars will be created, and the CBDC will be issued side by side with the retirement of Bahamian dollars so as to reduce the potential negative effects that may incur on monetary supply.
The Central Bank of the Bahamas first revealed their intention to pilot a CBDC in June 2018, after observing that several smaller islands were left vulnerable and without banking services after commercial banks downsized and pulled out of the area.
The Project Sand Dollar pilot, care of the government, was launched in December last year and the CBDC went through its initial testing on the small islands of Abaco and Exuma. The two islands represented populations of 17,224 and 7,314 respectively.
Each Sand Dollar was valued one-to-one with the Bahamian dollar, which is in turn pegged to the US dollar. Even though only 48,000 Sand Dollars were issued during the pilot, the project was considered as a success.
The goal of implementing a CBDC is shared by China and its other Caribbean neighbors, such as Barbados and Jamaica. Other countries that have managed to push further with such an initiative, such as Venezuela, Ecuador, and Finland, have not been successful. A large part of their difficulties has been because the CBDC was not adapted by its consumers.
It is hoped that the strict policies and government backing surrounding the CBDC will help set the stage for widespread adoption.