How the Bahamas is growing usage of world’s first CBDC

A recent report by PricewaterhouseCoopers (PwC) ranked Sand Dollar, a digital iteration of the Bahamian dollar, as one of just two fully operational retail central bank digital currencies worldwide.

The Sand Dollar is almost everything the Nigerian version of CBDC, the eNaira, wants to become.

While the eNaira is the first CBDC in Africa, the Bahamas Sand Dollar is the first and also the most advanced national digital currency in the world.

The Sand Dollar came to prominence as a solution to the transaction difficulties the country faced when it was hit by hurricane Dorian in 2019. The storm-battered the Island country, leaving most of its inhabitants without electricity. As government aid trickled down, many were desperate for help. Those who had money in banks couldn’t get cash or rely on the physical or electronic banking infrastructure.

According to a report, officials from the Central Bank of Bahamas often refer to the trauma of hurricane Dorian as one of the biggest advantages of the country’s pioneer launch of the Sand Dollar. Apart from being a means to digitally store money directly at central banks and using anywhere, Sand Dollar does not rely on internet connections for payment transfers as it can be authenticated on the device via token technology, making it very convenient as a payment and storage method even when banks are not accessible – as in the days and weeks after Dorian.

“After Hurricane Dorian (in 2019), it took banks more than a year to get their branch facilities restored. There are one or two banks that are still in the process of getting back to the state they were in,” said John Rolle, governor of the Central Bank of Bahamas.

The Sand Dollar was built with a clear set of objectives including building speed, efficiency, and security in payments; cutting costs of financial services and building inclusion across age and status; and tightening up control on money laundering, counterfeiting, and other cash-enabled fraud.

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Rolle said there are over 300,000 Sand Dollars in circulation used by over 20,000 people in the island country with a population of 399,826. The Sand Dollars in circulation are expected to grow in the coming months. The next line of action is ensuring there is interoperability with the automated clearing house so there can be a pass-through link between Sand Dollars and deposit accounts.

“What is important is to expand the merchant base, so there is more spending across the platform. It is at that point that we will see more meaningful statistics on the usage of Sand Dollars in circulation,” Rolle said.

To achieve that goal, the Bahamian central bank made a partnership with Island Pay, the first fintech company to receive a licence as a payment service provider and electronic money institution, to support large-scale payments distributions for the government. Island Pay also has one of the widely used electronic wallets in the country. The company said it has seen over 50 percent of its wallet holders create a Sand Dollar account. So far, only about 10,000 of those account holders actually use Sand Dollar.

Island Pay said it had seen more active users from the wallet interoperability mandate of the central bank. The bank makes interoperability among existing and new channels for the provision of payments services a cardinal objective.

Sand Dollar adoption by merchants has led to a reduction in the cost of transactions for merchants from 4.5 percent to 3 percent.