To accelerate the use of the central bank digital currency (CBDC) known as the “Sand Dollar,” the Bahamas has announced a two-year plan to incorporate the currency into commercial banks’ operations.
John Rolle, Governor of the Central Bank of the Bahamas, revealed his intention to formulate the necessary regulations to ensure all commercial banks provide their customers with access to CBDC.
Central bank strategy
includes
shifting from encouraging the use of the Sand Dollar on all banking platforms to making its use mandatory. Commercial banks must modernize their information systems to meet the new requirements. These improvements are essential for expanding the use of CBDC and enhancing the country’s mobile payment systems. Although technical challenges are anticipated, this transition is crucial for modernizing financial transactions and strengthening the digital economy’s infrastructure.
Despite efforts, the adoption rate of the Sand Dollar remains low, accounting for less than 1% of the country’s total money supply. From March 2022 to December 2023, revenue from the portfolio dropped significantly from $4.98 million to $1.2 million. This sharp decline has prompted the central bank to shift from voluntary to mandatory integration of digital currency.
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The Bahamas’ strategy reflects a global trend of central banks pushing for digital currencies. For example, the European Central Bank plans to make the use of the digital euro mandatory for retail and commercial banks as it continues its rollout. Similarly, after the initial incentives were removed, the Reserve Bank of India’s digital currency saw a decline in daily transaction volume, highlighting the challenges in maintaining organic demand for digital currency.
The Central Bank of the Bahamas focuses on regulatory measures rather than fiscal incentives to ensure the widespread use of its CBDC. By analyzing international experiences, the Bahamas seeks to establish a regulatory framework to ensure sustainable engagement with the Sand Dollar. This approach could serve as a model for global digital currency policy.
