The Bahamas has decided to take steps to increase the adoption of its central bank digital currency (CBDC) known as the “Sand Dollar” by providing access through commercial banks. This strategy aims to make the CBDC more widely available to the general public and businesses in the country, as reported by Reuters. Governor of the Central Bank of The Bahamas, John Rolle, stated that the country plans to establish regulations within two years to facilitate this process.
Despite the efforts to promote the Sand Dollar, adoption rates are still relatively low years after its launch in 2020. The Central Bank of the Bahamas sees the need for commercial banks to modify their IT systems significantly to comply with the upcoming regulations. According to Rolle, the current uptake of the CBDC is limited, requiring a shift from incentives to enforcement to increase adoption rates.
Recent data indicates that the Sand Dollar accounts for less than 1% of the country’s currency in circulation. Wallet top-ups also saw a decline from $49.8 million to $12 million in the eight months leading up to August 2023, based on central bank data. Rolle highlighted that while there are 120,000 mobile wallets in existence, they only make up less than 1% of retail payments, despite being equivalent to 20% of retail bank accounts.
Although adoption rates may be low, there have been some positive trends in the short term. The Central Bank of the Bahamas reported a modest seasonal growth in digital payments activities, including the Sand Dollar. Transactions involving the CBDC, both person-to-business (P2B) and business-to-business (B2B), reached a total of $4.5 million, doubling from November 2022. Additionally, personal wallet counts increased by 20% year-to-date in December 2023, and the amount of Sand Dollars in circulation rose by 60.8% to $1.7 million.
The Bahamas’ approach to mandatory adoption policies for CBDCs could serve as a model for other countries looking to increase the use of digital currencies. Reuters noted that the European Central Bank is considering similar strategies to require retail and banks to accept and offer any future digital euro. This shift towards digital currencies could have implications for the global financial system and may influence how other countries approach the adoption of CBDCs in the future.