On Thursday, October 22nd, 2020, the Central Bank of the Bahamas officially launched “Sand Dollar,” the country’s central bank digital currency (CBDC). And like any CBDC, it is of course state backed. It has also become available nationwide, and in addition to this, the Sand Dollar is built using blockchain technology – a known rarity with CBDCs.
A rarity indeed!
However, who can say what tomorrow will bring? Which leaves the possibility of this “rarity” becoming rapidly less so for the central banks, but rather their digital currency becoming all but common place in the financial world and how we interact on a financial level with it. But there’s a difference between CBDC, cryptocurrency and Bitcoin, in case you thought there were none.
The Central Bank Digital Currency “team” claims in their own words to be a centralised, regulated, stable, private and secured unit of account and means of exchange; whereas, Bitcoin (along with other cryptocurrencies) is decentralised, unregulated, volatile in value (exchange market traded), public and unsecured unit of account and means of exchange. And with statements like that – cryptocurrency fans would be forgiven for saying ‘the competition is an openly confident, yet not altogether friendly one.’
In fact, it’s vaguely reminiscent of open session in governmental Rome discussing Caesar’s order to have his head depicted on the newly created coinage, and the money-changing middlemen clambering for their say in the matter. But no matter who pushed forward to claim notoriety above all others back then…the silent and stark reminder remained, that the head of Caesar was in fact depicted on every coin.
And today is no different. A simple case of central banks putting their money where their mouth is? You can bank on it!
So, what does this mean for fiat currency the world over? After all, it’s no secret that huge economies like China and Japan have already created trials using their own digital currencies.
The news of the brand-new digital currency ‘Sand Dollar’ broke via a Facebook post from “Project Sand Dollar” themselves, who state that PSD is the initiative embarked on by the Central Bank of The Bahamas to issue its own digital variant of the Bahamian dollar as well as implement the relevant digital payments system infrastructure to sufficiently carry the operation of a digital currency ecosystem. This makes The Bahamas one of the first nations in the world to formally launch a CBDC, unlike Japan where the Japanese bank not only needs to find a feasible digital currency that can be used widely, but also one that can be accessed offline, in any environment, and not necessarily require reliance on a mobile device. And not forgetting China whose projects were also based on test it and see – atleast for now anyway.
Recent reports also show that the Bahamian central bank wants to make the Sand Dollar interoperable with all global currencies. Sounds to me like the Central bank of the Bahamas has not only launched this and become the first to do so, but it looks like they have also become the official ‘springboard’ from which all future CBDC’s will eventually spawn.
It’s no secret either, that the central bank had been planning the launch of the CBDC for some years now. In 2019, it began a pilot program not unlike the Chinese where it utilsed 48,000 digital Sand Dollars on the islands of Exuma and Abaco, which have a mixed population of fewer than 25,000. Exuma in particular was chosen, because the Central Bank of the Bahamas felt that it best represented the greater configuration of the Bahamas, which made it the ‘optimal site’ to begin pilot testing before scaling up operations to the entire country.
Each digital Sand Dollar is fastened to the Bahamian dollar, which is then pegged to the U.S. – it is therefore a dollar regulated by the Central Bank of The Bahamas. The digital B$ can be accepted at any merchant with a Central Bank approved e-Wallet (secured digital wallet) on their mobile device. But for now, the digital B$ can only be used within the Bahamas.
The Bahamian central bank invented the CBDC to match cash and advance the country’s current payment system. Project Sand Dollar works by requiring small transaction fees to users. Furthermore, the system is guarded by advanced encryption and intensified KYC/AML measures. And as the CBDC is distributed, regulated, and monitored by the central bank, it provides it with the same financial security as the Bahamian fiat – unlike cryptocurrencies.
According to the official website for ‘Project Sand Dollar’ under their FAQ section, this new digital dollar will give a more comprehensive path to set payments and other business services for under-serviced societies and socio-economic organisations. It will also decrease service distribution expenses and improve the transactional facility for business services over the Bahamas.
In all, the central bank has approved six business organizations for Project Sand Dollar, and they are: Omni Financial, Kanoo, SunCash, Cash N Go, Mobile Assist, and Money Maxx. The central bank will proceed to onboard and whitelist business organisations, but for the most part, it is the [institutions] who are really driving this from now on.
According to Chinese news source The Paper, the very same institution – dubbed the central bank for central banks, is planning its own trial of a CBDC in collaboration with the Swiss central bank. The news comes after Agustin Carstens himself, who is the general manager of the Bank for International Settlements (BIS), seemingly contradicts his 2019 warning over the ‘need for caution’ when considering central bank digital currencies.
While many central banks are still “publicly” saying they are evaluating the technology, there appears to be a movement towards rolling out national digital currencies much sooner rather than a possible later. Even a digital euro is looking more and more likely, according to leaders at the ECB.