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Bahamian Sand Dollar now world’s first fully deployed CBDC

Posted: 23 October 2020 7:09 pm
News

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The Bahamian Sand Dollar is a one-of-a-kind digital currency, for now.

The world's first fully deployed central bank digital currency (CBDC) has arrived in the Bahamas with the rollout of the Bahamian CBDC, dubbed the Sand Dollar.

There are several intriguing elements which set the Sand Dollar apart from most other CBDCs currently in the works.

One is that it's a form of retail CBDC, meaning it's the direct liability of the central bank and that instead of working behind the scenes as a wholesale CBDC, the Sand Dollar is intended to be put straight into the hands of consumers to start delivering benefits immediately.

In this case those benefits include lowering the cost of cash management, and the acceleration of digital payment adoption in a place where cash and cheques are still popular for payments. According to the Sand Dollar FAQs, the cost of Sand Dollar transactions will be "negligible."

This makes it an interesting case study for many other emerging economies, which are expected to be some of the main beneficiaries of the digital currency revolution.

As a Bank of International Settlements (BIS) survey of central banks previously found, emerging market economies (EMEs) and advanced economies have very different drivers behind wholesale and retail CBDCs. Overall, it's reckoned that EMEs have more reasons to skew towards retail rather than wholesale CBDC, and can potentially benefit more from CBDCs in general than advanced economies.

As a one-of-a-kind example of a live EME wholesale CBDC, the Bahamian Sand Dollar could be a vital case study for many central banks.

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"It is great to see a first productive CBDC in the Bahamas. This is an important step towards accelerated digital transformation and CBDC adoption. It is also interesting to see that it is mainly intended to provide financial access to the Bahama’s increasingly unbanked population due to the banking sector downsizing physical branches," said METACO Germany sales director Johannes Kaske.

"In this vein, it appears to have a slightly different purpose as compared to CBDC initiatives from major economic areas like China, Europe or the United States. In those areas, I see the potential of innovating financial markets with automated payments, more efficient payment infrastructures or new types of assets to be a more important driver of efforts."

"However, as the Sand Dollar is backed by the Central Bank of the Bahamas and tied to the BSD - and thus the USD - it might fuel new tokenisation projects, as the Sand Dollar would be a regulated alternative to non-governmental third party stablecoins. Still, large scale institutional adoption of tokenisation will likely require a digital version of a major global currency."

"In my opinion, central banks across the globe are likely to intensify their CBDC efforts and will monitor the developments and adoption of the Sand Dollar and further CBDCs very closely," Kaske added.



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Disclosure: The author owns a range of cryptocurrencies at the time of writing

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