The Bahamas is taking steps to enhance the adoption of its central bank digital currency (CBDC), known as the “Sand Dollar.” According to a report by Reuters on July 1, the country’s central bank governor, John Rolle, highlighted the importance of making the Sand Dollar accessible through commercial banks to increase its adoption rates. The government aims to establish regulations within the next two years and has begun signaling its intent to banks to facilitate this process.
Challenges in Adoption Rates
Despite the launch of the Sand Dollar in 2020, its uptake has been relatively low, with CBDC accounting for less than 1% of the country’s currency in circulation. Reuters reported a significant drop in wallet top-ups, falling from $49.8 million in the same period in 2022 to $12 million in the eight months before August 2023, based on central bank data. Rolle acknowledged the challenges, describing the current scenario as having “wide use, but very low average transaction value.”
To address the low adoption rates, the Central Bank of The Bahamas is considering mandatory adoption policies that would require all commercial banks to provide their clients with access to the Sand Dollar. This move aims to encourage more widespread use of the CBDC and mobile payments. While the transition may require banks to modify their existing IT systems significantly, the central bank believes that enforcement is necessary to drive adoption.
Despite the initial hurdles, there have been some positive developments in the adoption of the Sand Dollar. A central bank press release from February indicated modest growth in digital payments activities, including a significant increase in person-to-business (P2B) and business-to-business (B2B) transactions involving the Sand Dollar. The number of personal wallets has also seen a 20% increase year-to-date, and the total amount of Sand Dollars in circulation has risen by 60.8% to $1.7 million.
The Bahamas’ efforts to enhance the adoption of its CBDC could set a precedent for other countries looking to introduce their digital currencies. Reuters noted that the European Central Bank is considering similar policies to require retail and banks to accept and offer any future digital euro, reflecting a growing trend towards the widespread adoption of digital currencies worldwide.
While the challenges in adopting the Sand Dollar are evident, the Central Bank of The Bahamas remains committed to increasing its usage through regulatory measures and incentivizing commercial banks to provide access to the CBDC. The success of these efforts could pave the way for a more digitally inclusive financial ecosystem in The Bahamas and beyond.
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