China has been leading the Central Bank Digital Currency (CBDC) race for quite some time now, but it isn’t going to be the first to deploy its state-baked digital currency. A recent report from Bloomberg has revealed that the Bahamas plans on becoming the first country to launch a nationwide CBDC, with an expected October launch.
This is an interesting turn of events as everyone had been eyeing China to come out its Digital Yen, considering the fact that several reports of a number of big banks and major payment service providers in the nation testing its CBDC wallet also surfaced recently.
However, Chaozhen Chen, the assistant manager of eSolutions at the Central Bank of The Bahamas, told Bloomberg that the Bahamas is ready with its digital currency dubbed ‘Sand Dollars’, intended to drive greater financial inclusion and make digital payments easier among the remote islands that are heavily dependent on Tourism.
The nation has minted just $48,000 worth of Sand Dollars as of now, which is pegged 1:1 with the nation’s Bahamian dollar. Even though the project is being implemented on a small scale, it will push the nation at the forefront of a global race to create state-backed digital currencies.
“A lot of residents in those more remote islands don’t have access to digital payment infrastructure or banking infrastructure. We really had to customize the effort and the solution to what we need as a sovereign nation,” said Chen.
Furthermore, Chen added that the CBDC will be subject to similar regulations like that of the Bahama dollar, including anti-money laundering and know-your-customer laws in place to govern the creation of accounts to use the virtual currency.
Once the system is in place, users will be able to execute peer-to-peer transactions via their mobile phones even when offline. The system is expected to make the settlement process much more straight forward for payment service providers that will be facilitating these transactions.
More Sand Dollars will be minted in the future as demand rises, with the CBDC exclusively issued alongside the retirement of Bahamian dollars to mitigate potential impacts on monetary supply.