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Bahamas Pushes Banks to Embrace 'Sand Dollar' CBDC

Bahamas Pushes Banks to Embrace ‘Sand Dollar’ CBDC

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95 Listen to this article Introduction The Bahamas, a forerunner in launching a central bank digital currency (CBDC) with its […]

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Introduction

The Bahamas, a forerunner in launching a central bank digital currency (CBDC) with its “Sand Dollar” in 2020, is taking new steps to increase its usage. The government is planning to pass a law that will require commercial banks to support the Sand Dollar, setting an example for other countries considering digital currencies.

Legislative Push for Banks

According to a June 2 report from Reuters, John Rolle, the governor of the Bahamas central bank, announced upcoming legislation that will compel commercial banks to distribute the Sand Dollar. This move comes as the CBDC has not been widely adopted since its release. “We anticipate a scenario where all commercial banks will eventually need to provide their customers with access to the central bank digital currency,” Rolle stated.

Adoption Challenges

Despite being a pioneer in CBDC implementation, the Bahamas has seen limited adoption of the Sand Dollar, which represents less than 1% of the country’s currency. Additionally, the total amount loaded into Sand Dollar wallets dropped to $12 million between January and August last year, down from $49.8 million during the same period in 2022.

Comparative Difficulties

Mandating commercial banks to support the Sand Dollar will require significant technological updates. Nonetheless, the central bank views this as essential for increasing CBDC adoption and promoting mobile payments. The Bahamas is not alone in facing challenges with CBDC uptake. In China, participants in the e-CNY pilot program have shown a preference for traditional cash due to usability and privacy concerns. Similarly, Nigeria, the first African nation to launch a CBDC, has experienced low adoption, with less than 1% of bank account holders having eNaira wallets, and only 1.5% of those wallets being actively used weekly.

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Global Influence

As the first country to introduce a CBDC, the Bahamas’ actions are being closely monitored by over 130 countries exploring digital currencies. “We have begun to inform our institutions,” Rolle told Reuters during a visit to London, noting that the regulations should be in place within the next two years.

Industry Concerns

CBDCs have sparked debate between central and commercial banks. Banking groups caution that these digital currencies could lead to deposit flight by effectively offering public central bank accounts. The European Central Bank has indicated that it may require eurozone retailers and banks to accept and distribute a digital euro in the future. However, the Bahamas might be the first to implement such regulations.

Technical and Social Hurdles

Implementing the Sand Dollar across commercial banks will require extensive changes to their IT systems. Despite these challenges, the central bank considers this integration crucial for increasing CBDC usage and mobile payments. Rolle emphasized that the ultimate goal is to encourage more businesses, including shops and restaurants, to accept the Sand Dollar as a payment method. Unlike India, which offered financial incentives during its e-rupee trials, the Bahamas does not plan to provide such incentives or offer interest rates on Sand Dollar wallets.

Notable Quote

“We anticipate a scenario where all commercial banks will eventually need to provide their customers with access to the central bank digital currency,” said John Rolle, Governor of the Bahamas Central Bank.

Tweet Highlight

The Bahamas mandates banks to support its Sand Dollar #CBDC, aiming to boost digital currency adoption amidst global scrutiny. Will this set a new precedent? 🌐💰 #DigitalCurrency #FintechNews

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