The Bahamas has become the first country in the world to fully deploy its own Central Bank Digital Currency (CBDC), the “Sand Dollar”, the country’s central bank said in a tweet on 20 October.
According to the announcement, the Central Bank of The Bahamas made the digital currency available nationwide on Tuesday, and has tasked authorised financial institutions (AFIs) with its distribution. The bank first announced the launch date of the Sand Dollar in September, and with its release, has become the first financial entity in the world to officially roll out its own CBDC project to the general public.
The bank said in a statement:
“The intended outcome of Project Sand Dollar is that all residents in The Bahamas would have use of a central bank digital currency, on a modernized technology platform, with an experience and convenience – legally and otherwise – that resembles cash.”
Last month, the bank revealed that the Sand Dollar will be gradually made available to its citizens through a couple of phases. The first one will see private sector entities, such as banks and credit unions, ready their systems with Know-Your-Customer (KYC) compliance checks across low-value, personal and enterprise wallets. The second phase, scheduled for early-to-mid 2021, will focus on updating essential government and private sector infrastructure services, so they are ready for the CBDC.
With roughly 90% of its population having access to a mobile phone, the country has decided to make its CBDC services mobile-based. The Sand Dollar digital wallets will have multi-factor authentication security, and will enable its users to use the digital currency at any merchant with a “Central Bank approved e-Wallet on their mobile device”. The bank further said in its FAQ section that the transaction fees will be “negligible”, and that the Sand Dollar will be pegged to the Bahamian dollar, a currency that is pegged to the U.S. dollar.
While the bank has been exploring CBDC technology for a few years now, it officially launched a pilot program for its project “Sand Dollar” in 2019. The bank decided to appoint transaction provider NZIA as its technology provider, and then began its pilot program using 48,000 Sand Dollars on the islands of Exuma and Abaco, which together have less than 25,000 population.
Considering The Bahamas is an archipelago nation with more than 700 islands, there are limits to the reach of traditional financial infrastructures. With that said, it seems that the underserved communities in the nation will be the primary target of the CBDC initiative, which will reduce the financial service delivery costs, and boost transactional efficiency.
While The Bahamas has become the first country to officially release a CBDC, other nations are not far behind. China, for example, is already conducting real-world tests of its own CBDC project, the Digital Currency/Electronic Payment (DC/EP) system. The most recent trial saw the People’s Bank of China (PBoC) hold a digital yuan giveaway, in which more than 47,000 lottery winners received a “red envelope” containing 200 digital yuan.