Caribbean & Central America - July 2021

The Bahamas central bank governor John Rolle recently gave an update on the island nation’s central bank digital currency (CBDC), the sand dollar.

Launched in October 2020 following a pilot in 2019, the sand dollar is a digital version of the traditional Bahamanian dollar, which differentiates it from cryptocurrencies such as bitcoin, which are made to be free from ties to central authorities. The sand dollar made The Bahamas a global leader in digital currency, coming into use six months before China’s “digital renminbi.”

Rolle, who has been central bank governor since 2016, told Bloomberg in an article published on 20 May that the aim of the sand dollar is to improve access to banking across the complicated geography of the island nation, where some bank branches still haven’t been rebuilt following Hurricane Dorian in 2019, and accelerate the move to digital transactions. In the interview Rolle said there were 200,000 sand dollars in circulation, a number which is likely to increase rapidly in the next few months, and he also forecasts growth in user numbers as people become more familiar and comfortable with the idea of digital currency. “What we want is - for anyone who today is making a payment by writing a check or having to withdraw cash - that they can accomplish the same through this new payment channel,” said Rolle.

The Eastern Caribbean Central Bank (ECCB) also launched a digital currency pilot called DCash on 31 March, and Rolle said The Bahamas had shared expertise during the development process. The ECCB covers the Eastern Caribbean Currency Union (ECCU), which includes eight islands, but the DCash pilot will cover four: Antigua and Barbuda, Grenada, St Kitts and Nevis and Saint Lucia. Rolle also mentioned that several other Caribbean nations are also exploring CBDCs. “I think part of the excitement for the region is the possibility of exploring technical cooperation that will eventually lead to regional payment platforms,” he said. “There are some constraints, because it depends on the level of interregional trade, and typically we trade a lot in US dollars. But once you move beyond that, there is some room for an interregional mechanism.

Experts say CBDCs could present a threat to payment firms and banks if people shift to using them instead of credit and debit cards. This would reduce their income from transaction fees. In an article published in December 2020, news agency Reuters spoke to a small business owner in The Bahamas who cited avoiding these fees, in their case around 4% of sales, as a positive in adopting the sand dollar. However The Bahamas has teamed up with Mastercard on a prepaid card which allows customers to instantly convert sand dollars to Bahamanian dollars and pay for items at any business which accepts Mastercard. The company is also developing a platform that will assist central banks in developing digital currencies.

The Bahamas has been hailed as a success story as other countries around the world wake up to the potential of CBDCs. In June Andrew Bailey, the Governor of the Bank of England (BoE), hailed the digital currencies as potentially “one of the most fundamental innovations in the history of central banking” which will “move us into a new era.” And The Bahamas is at the forefront of the movement, with British consultancy firm PwC ranking the country first in the world for retail CBDC development in an April 2021 report, as almost 25% of sand dollar pilot programs are now at the implementation stage. With a warm reception from early adopters and increasing familiarity with digital currencies, it seems likely that the sand dollar will continue to go from strength to strength.