Central Bank of the Bahamas pilots digital Sand Dollar
The Central Bank of the Bahamas is in the process of piloting a digital Bahamian dollar which pits it in the running to be the first digital currency by a central bank (CBDC) alongside China’s pilot of its digital yuan.
Called Project Sand Dollar, the currency – named the Bahamas Sand Dollar – is undergoing a pilot in Exuma, a district of the Bahamas, which will last for the first three months of 2020 before it extends to Abaco, a group of islands and barrier cays in the northern Bahamas, from April 2020.
In a bid to streamline the tourism economy, the central bank believes the creation of a digital currency in the Bahamas will boost digital transactions throughout the country and tap swathes of the population currently excluded due to remoteness from physical banking services.
The currency will be the same value as the Bahamian dollar (BSD), and the Bahamian dollar is pegged to the US dollar on a one-to-one basis (BSD1 = $1).
Continuing the Bahamian Payments System Modernisation Initiative (PSMI) which began in the early 2000s, the central bank’s latest research pointed its pilot of the digital currency to Exuma because of “a high rate of access to mobile devices and a willingness of more than half of residents to undertake more payment on digital platforms”.
As well as a “willingness” for more digital options, the central bank also says the “onerous” customer due diligence standards for anti-money laundering (AML) and combating the financing of terrorism (CFT) has led to “forms of exclusion”, as well as tighter “know your customer” (KYC) systems which were introduced to preserve certain international relationships held by the banks.
After Hurricane Dorian struck last year, the most intense tropical cyclone on record to hit the Bahamas, Abaco residents in particular will benefit from the boost to local economy which will help them address urgent financial infrastructure repairs.
Elsewhere in the world, the People’s Bank of China (PBC) is currently piloting its digital yuan. In mid-November 2019 the country started the first stage of implementation by choosing its three pilot provinces: Shenzhen, Hebei and Zhejiang, which together have a combined population of 261.5 million.
This piloting ground can be compared to the 390,405 people in total who live across the Bahamas, pointing to the sheer difference in scale of the countries’ cryptocurrency operations.
China now seems to be issuing a digitised version of national identity cards as part of the second phase of its pilot.
The Association of German Banks (Bankenverband) also published a paper last November arguing the case for a digital euro which is controlled by the state and avoids global first mover companies such as Facbook from securing a monopoly.
“Europe has to compete in this competition so that the global financial architecture does not polarise between American or Chinese solutions,” Bankenverband’s paper reads, noting China’s u-turn on cryptocurrency which saw the state ban anti-blockchain sentiment and develop its own digital currency.