The Sand Dollar: How The Bahamas Took The Lead In The Future Of Digital Payments
Your favorite vacation destination might just be more technologically advanced than you think.
When people hear about The Bahamas, the first things that they normally think of are sun, sand and sea. Well.. get ready to add digital payments to the list.
The island nation of The Bahamas (that I’m proud to call “home”) was in the news for a few reasons this week — one of those being the notable progress of our central bank digital currency (CBDC), the Sand Dollar.
I will preface this article by clarifying that my overall stance on CBDCs is unchanged— while I am against most people moving toward CBDCs instead of crypto, I accept them, from a regulatory standpoint, as an inevitable part of our progression toward a cashless society. I’m just glad that The Bahamas is leading the global race in this field.
My first time seeing mention of digital currencies in The Bahamas (the capital “T” in “The” is intentional.. take note writers/editors) was the paper, “The Bahamas’ place in a Cryptographic World,” written in 2018 by Aliya Allen, a partner at the Bahamian law firm, Graham Thompson. In this paper, Allen assessed the societal and governmental implications of introducing products such as cryptocurrencies, ICOs and crypto exchanges to the country.
Back in 2003, the Central Bank of The Bahamas began exploring possible solutions to improve the country’s monetary system with the implementation of The Bahamian Payments Systems Modernisation Initiative (PSMI).
Through the initiative, Project Sand Dollar was launched in 2019 on the island of Exuma. This led to the creation of the Sand Dollar, a digital representation of the local currency, the Bahamian dollar (BSD). According to the official website, the project had four primary objectives:
- increase the efficiency of the Bahamian payments systems through more secure transactions and faster settlement speed
- achieve greater financial inclusion, cost-effectiveness, and provide greater access to financial services across all of The Bahamas
- provide non-discriminatory access to payment systems without regard for age, immigration or residency status
- strengthen our national defences against money laundering, counterfeiting, and other illicit ends by reducing the ill effects of cash usage.
After the short trial period on Exuma, the trials were extended to the island of Abaco in February 2020 then, eventually, the nationwide launch occurred in October 2020.
In keeping up the momentum of the digital payments program, it was announced in February 2021 that MasterCard and Island Pay, in collaboration with the Central Bank, launched the world’s first CBDC-linked (prepaid) card. As part of MasterCard’s “crypto card program,” the feature would offer Bahamians greater flexibility in the ways that they could use the Sand Dollar. With this new development, John Rolle, governor of the Central Bank of The Bahamas, was quoted:
We welcome this approach to combining digital currency use with access to foreign currency and other payment outlets. The Central Bank of The Bahamas will continue to encourage fintech developments that tie into the Sand Dollar infrastructure, while allowing us to satisfy best global practices for regulation of the space.
Richard Douglas, the cofounder of Island Pay, also spoke out regarding this new development in the progress of the CBDC, stating:
By working closely with the Central Bank of The Bahamas and Mastercard, we are able to issue a prepaid card unlike any other in the world. We are now able to bring immediate, critical benefits to our customers at a time when they are looking to find new, innovative ways to pay. The Bahamas is leading innovation in CBDCs, and we’re thrilled to be able to play an important role in helping to democratize access to currency, especially in areas that are currently underserved.
This leads us to the most recent headlines regarding the CBDC project. Yesterday (April 19), it was announced that, while only 23% of the world’s retail CBDC projects were at the implementation stage and about 70% of wholesale projects are in a pilot program phase, The Bahamas is currently the global leader in terms of their project’s development and execution.
The well-known consulting firm, PricewaterhouseCoopers (PwC), gave The Bahamas this ranking based on the research from their 2021 “CBDC global index.” Based on this research, The Bahamas came in first place (out of over 60 central banks that were looking to create their own CBDC) with a score of 92/100. In a distant second place was Cambodia with 83/100, followed by China in third with 75/100 and Ukraine in fourth with 71/100.
So what does this mean for the archipelagic nation?
Well.. it’s definitely substantial progress. Being a nation of over 700 islands and cays, there has always been a need for more infrastructural growth and development to increase the access to resources throughout communities on many of the lesser developed islands. Up to this day, Bahamian citizens are still highly dependent on physical cash for most day-to-day transactions and the existing infrastructure for telecommunications still leaves much to be desired.
This progressive shift toward a more digital-focused approach to financial instruments has been long overdue and, although I still have my personal qualms with CBDCs (a concept that was literally just introduced to the world back in 2018), I’m just happy to see the country shine on the global stage in a field that, without a doubt, will be dictating the future of money and finance.
So cheers to a huge step forward into the future of The Bahamas.
