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The Sand Dollar: Why Bahamas Digital Currency is Unique?

The Central Bank of the Bahamas (CBOB) has introduced a digital version of the Bahamian dollar, starting with Exuma’s pilot phase in December 2019. The digital currency was extended to Abaco in the first half of 2020 and now moving to a nationwide launch in October.

This launch represents the first Central Bank Digital Currency (CBDC) launch globally since China’s digital Yuan is not expected to launch until the Beijing Winter Olympics in 2022.

The assistant manager of eSolutions at the Central Bank of The Bahamas, Chaozhen Chen, told Bloomberg that the Sand Dollars is intended to drive greater financial inclusion in the archipelago nation’s remote islands.

Sand Dollar transfers are made by mobile phone, with roughly 90% of the Bahamian population using mobile phones as of 2017.

The Bank reported that the population’s pockets are excluded because of remoteness or more stringent know your customer (KYC) requirements. Also, in recent years numerous banking branches have closed for commercial reasons. Plus, improving financial inclusion helps to formalize the economy. For example, if small informal vendors can accept digital payments, they can establish a credit history and enter the formal sector. But we wonder about their concerns about paying taxes.

A second reason for the Sand Dollar is to reduce the costs of using cash. There’s also an argument that it’s safer than physically depositing bundles of money.

More recently, both Hurricane Dorian and COVID-19 highlighted additional benefits. In the case of storm damage, it took weeks or months to restore local bank branches and ATMs, but mobile phone coverage was reinstated within days. And for the pandemic, digital payments are contactless and remove the need to queue at banks.

If a bank or payment provider wants to add Sand Dollars to their wallet, they request it from the Central Bank, which mints the Sand Dollars and adds it to the institution’s wallet. The payment for the Sand Dollars is made in fiat currency. These institutions are the gateways for individuals and businesses to top up their wallets. To start a Sand Dollar, wallet users do not require a bank account. Nor do they need a phone as there’s an option of a card-based wallet similar to a prepaid credit card.

 

 

 

Image: Ralph Häusler

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Sources

Baker P. 2020. Bahamas to Roll Out ‘Sand Dollar’ Digital Currency Next Month. Coindesk: https://www.coindesk.com/bahamas-sand-dollar-central-bank-digital-currency

Haig S. 2020. The Bahamas will launch a digital central bank ‘Sand Dollar’ in October. CoinTelegraph: https://cointelegraph.com/news/the-bahamas-will-launch-its-central-bank-sand-dollars-in-october

Mcintosh R. 2020. Bahamian Central Bank Launches ‘Sand Dollar’ Digital Currency – World First?. Finance magnates: https://www.financemagnates.com/cryptocurrency/news/bahamian-central-bank-launches-sand-dollar-digital-currency-world-first/

Smith O. 2019. Digital Currency ‘Sand Dollar’ Launched by the Bahamas. Shufti Pro: https://shuftipro.com/news/digital-currency-sand-dollar-launched-by-the-bahamas#:~:text=The%20Central%20Bank%20of%20the,the%20first%20half%20of%202020.

Wyss J. 2020. Bahamas Plans E-Currency to Connect Far-Flung Island Beaches. Bloomberg: https://www.bloomberg.com/news/articles/2020-09-15/bahamas-plans-nationwide-rollout-of-sand-dollar-e-currency