The Bahamas to Expand Access to Central Bank Digital Currency Through Commercial Banks

The Bahamas is taking steps to boost adoption of its central bank digital currency (CBDC) known as the “Sand Dollar” by providing access through commercial banks. This move aims to make it easier for individuals to utilize the digital currency for various transactions. Governor of the Central Bank of The Bahamas, John Rolle, mentioned that the country plans to introduce regulations over the next two years to pave the way for banks to offer the CBDC to their clients.

While the expansion of access to the Sand Dollar is seen as crucial for improving CBDC and mobile payment adoption rates, it comes with its own set of challenges. Banks will need to make significant modifications to their existing IT systems to comply with the new requirements. Despite efforts to promote the use of the digital currency, adoption rates have remained relatively low since its launch in 2020.

According to reports, the Sand Dollar currently accounts for less than 1% of the total currency in circulation in The Bahamas. Data from the central bank indicates a decline in wallet top-ups, from $49.8 million in the same period in 2022 to just $12 million in the eight months leading up to August 2023. This decline underscores the need for a shift from simply providing incentives to enforcing the use of the CBDC.

While there are over 120,000 mobile wallets in existence, representing 20% of retail bank accounts, the actual usage of mobile wallets for retail transactions remains minimal at less than 1%. The Central Bank of The Bahamas noted some positive short-term data, such as a growth in digital payments activities involving the Sand Dollar. This includes an increase in person-to-business (P2B) and business-to-business (B2B) transactions totaling $4.5 million, a significant rise from previous months.

The move by The Bahamas to expand access to the Sand Dollar through commercial banks could serve as a model for other countries looking to implement their own CBDCs. The European Central Bank, for instance, has expressed a similar intention to mandate the acceptance and offering of any future digital euro by retail and commercial banks. This shift towards digital currencies reflects the growing trend towards a cashless society and the increasing importance of digital transactions in the modern economy.