The Bahamas, a pioneer in launching a central bank digital currency (CBDC), will require commercial banks to support the ‘Sand Dollar’.
In a groundbreaking move to increase CBDC adoption, the Bahamas is preparing legislation that will require commercial banks to support the “Sand Dollar”. The initiative, announced by John Rolle, Governor of the Central Bank of the Bahamas, marks a significant shift in the country's approach to cryptocurrency.
Bahamas CBDC Journey and Upcoming Regulations
The Bahamas was the first country in the world to launch a CBDC in 2020. Despite the early start, Sand Dollar's adoption rate was lower than expected. Currently, Sand Dollar accounts for less than 1% of currency in circulation in the Bahamas. To solve this problem, the Central Bank of the Bahamas is expected to introduce new regulations in the next two years, forcing commercial banks to distribute this cryptocurrency.
John Rolle emphasized the need for these measures, saying, “We foresee a process where all commercial banks will eventually enter that space and they will have to offer customers own access to cryptocurrency from the central bank.”
Current adoption rates are quite disappointing, with total Sand Dollar wallet deposit volume dropping from $49.8 million from January to August 2022 to just $12 million during the same period in 2023. Also , approximately 101,636 Bahamians own e-wallets, but only 1,512 are merchant wallets and only 455 businesses are actively accepting Sand Dollars. These figures highlight the need for a more robust infrastructure and broader acceptance of the Sand Dollar in everyday transactions.
Global landscape and challenges in CBDC adoption
The Bahamas is not the only country having difficulty accepting CBDC. In China, participants in the e-CNY pilot program have expressed a preference for traditional cash due to availability issues and surveillance concerns. Similarly, Nigeria, another early adopter of CBDC, has seen minimal adoption, with less than 1% of people with bank accounts using eNaira wallets as of mid-2023.
The common problem seems to be a lack of clear benefits over existing payment methods and concerns about privacy and government surveillance. These barriers also exist in the Bahamas, where the central bank hopes that mandating banks to support the Sand Dollar will spur broader adoption from merchants and the public.
Impact on the future
The proposed regulations would require commercial banks to make significant technological updates, ensuring they can integrate Sand Dollar into their systems. The move is seen as important not only to increase CBDC adoption but also to promote mobile payments in general.
The Central Bank of the Bahamas has clarified that while it is pushing for wider adoption, it will not offer financial incentives or interest rates on the Sand Dollar wallet, unlike some other countries trying Experience with cryptocurrency. This decision reflects a strategic focus on creating a sustainable and organically growing cryptocurrency ecosystem.
As the Bahamas moves forward with this bold regulation, the world will be watching closely. The lessons learned from this pioneering effort could provide valuable insights to other countries exploring the potential of CBDCs, especially those in the Caribbean and beyond.
The success or failure of the Sand Dollar in achieving widespread adoption is likely to influence the future strategies of central banks globally, making the Bahamas a key player in the development continuity of cryptocurrency.
