Bahamas to Mandate Bank Support for Sand Dollar CBDC to Boost Adoption

The Bahamas, the first country in the world to launch a central bank digital currency (CBDC), is taking decisive steps to boost the adoption of its “Sand Dollar” by preparing regulations that will require commercial banks to provide access to the digital currency. John Rolle, the governor of the Central Bank of the Bahamas, revealed in a recent interview with Reuters that these new rules are expected to be in place within the next two years.

Launched in October 2020, the Sand Dollar has seen limited uptake despite being a pioneer in the CBDC space. Currently, it accounts for less than 1% of the currency in circulation in the Bahamas. The central bank’s data shows that by the end of 2023, the volume of Sand Dollars in circulation had risen by 60.8% to $1.7 million from the beginning of the year, with the number of personal wallets expanding by 20% to 118,955.

Rolle emphasized the necessity of this move, stating, “We foresee a process where all of the commercial banks will eventually be in that space and they will be required to provide their clients with access to the central bank digital currency.” This mandate will require significant changes to banks’ IT systems, but the central bank views it as crucial for stimulating CBDC adoption and mobile payments more broadly.

The Bahamas is not alone in facing challenges with CBDC adoption. Other countries like Nigeria and China have also experienced lower-than-expected uptake of their digital currencies. These experiences highlight the broader difficulties in introducing CBDCs, including limited perceived advantages over existing payment methods and public concerns about potential government surveillance.

To address these challenges, the Bahamas has been working on expanding the CBDC’s reach. By the end of 2023, there were seven active digital wallet providers and nearly 1,800 retail outlets supporting the Sand Dollar. The central bank has also partnered with Movmint (formerly NZIA) to deploy a private distributed ledger technology for the CBDC.

While the Bahamas is unlikely to offer financial incentives for Sand Dollar use, as India has done with its e-rupee trials, the focus remains on increasing merchant acceptance and improving user experience. The central bank is also addressing infrastructure issues, such as patchy telecommunications reception, by developing an offline version of the CBDC.