The Bahamas is taking steps to ramp up adoption of its central bank digital currency, known as the “Sand Dollar.” According to Reuters, the country’s central bank governor, John Rolle, announced plans to provide access to the CBDC through commercial banks. Rolle revealed that the country aims to establish regulations within the next two years and has already begun signaling its intentions to banks.
Challenges and Opportunities
Despite the potential benefits of the Sand Dollar, the Central Bank of the Bahamas faces challenges in increasing its adoption rates. Rolle acknowledged that commercial banks will need to make significant modifications to their existing IT systems to comply with the upcoming requirements. The low uptake of the Sand Dollar since its launch in 2020 has prompted a shift from incentives to enforcement to drive adoption.
Recent data reveals that the Sand Dollar accounts for less than 1% of the country’s currency in circulation. Reuters reported a decrease in wallet top-ups from $49.8 million to $12 million over an eight-month period. Rolle pointed out that while there are 120,000 mobile wallets, they represent less than 1% of retail payments, despite accounting for 20% of retail bank accounts.
While initial adoption may have been slow, the Central Bank of the Bahamas noted a modest increase in digital payments activities involving the Sand Dollar. Transactions between individuals and businesses doubled to $4.5 million, with personal wallet counts rising by 20% by the end of December 2023. The total amount of Sand Dollars in circulation also saw a significant increase of 60.8%.
The Bahamas’ push for mandatory adoption of the Sand Dollar may set a precedent for other jurisdictions looking to introduce their own central bank digital currencies. Reuters highlighted the European Central Bank’s similar plans to require retail and commercial banks to accept and offer any future digital euro. The success of the Sand Dollar could pave the way for broader acceptance of CBDCs in the global financial system.
The Bahamas’ efforts to boost adoption of the Sand Dollar through commercial banks represent a significant step towards mainstreaming central bank digital currencies. While challenges persist, the country’s commitment to establishing regulatory frameworks and incentivizing adoption could help drive the widespread use of CBDCs in the future.
