DIGITAL DOLLARS FOR ONLINE TEA

 In October 2020, The Bahamas leapfrogged into the digital vanguard with the launch of the world’s first central bank digital currency—the sand dollar.

Pegged one-to-one to the Bahamian dollar and using a blockchain-backed digital token, the new currency is available to people and businesses to buy and sell goods and services and send money to each other. Sand dollars are issued and regulated by The Bahamas’ central bank.

The Bahamas territory is spread out over 700 islands—making it unprofitable for commercial banks to have ATMs or physical branches on remote, sparsely populated islands. Extreme weather events make the cost of maintaining infrastructure even steeper. As a result, the most vulnerable often lack access to financial services.

The need to serve the unbanked and under-banked population, along with a drive to modernize the payment system, spurred the central bank’s introduction of the new digital currency.

“We didn’t start with the idea of a central bank digital currency,” says John Rolle, governor of the Central Bank of The Bahamas. “We focused on eliminating as many obstacles as possible for persons having access to the equivalent of a deposit account or a mobile wallet account to conduct transactions.”

Following successful pilots the central bank began distributing sand dollars to Bahamian commercial banks, payment system providers, and money transfer operators. Funds are placed in clients’ digital wallets, which allow access to various amounts of money and transaction thresholds.

Anke Weber, IMF mission chief for The Bahamas, attributes the fast rollout and growing interest to the need created by 2019’s devastating Hurricane Dorian and the COVID-19 pandemic.

It is still early days, with only $130,000 worth of sand dollars in circulation compared with $500 million Bahamian dollars. Customers’ initial reaction has been positive.

Those who are using the sand dollar enjoy the ease, faster turnaround, and lower costs.

“When I first heard about the sand dollar, I was extremely excited,” says Brandon Kemp, founder of Tin Ferl, a popular pop-up food park in Nassau. “The amazing thing about the sand dollar is that there are no fees or transaction costs. So, if I need to pay one of my staff, I can do it right there in the moment; they receive it literally within seconds, and everybody is happy with that.”

Using the sand dollar doesn’t even require a bank account or a mobile phone, although that’s how most transactions take place.

And while it wasn’t designed with the pandemic in mind, users uniformly cite the safety of a cashless transaction as a key reason for adopting the digital currency. “What convinced me to go with this sand dollar is mainly because of COVID,” says Mikia Cooper, an attorney at law firm Twenty Twenty and Associates.

As countries around the world experiment with central bank digital currency, lessons from The Bahamas’ experience will no doubt be watched closely.