The Bahamas are on the verge of becoming the first nation in the world to introduce a state-backed digital currency. The Bahamas Central Bank announced that it would issue a central bank-backed cryptocurrency (CBDC) next month.
Chaozhen Chen, the Central Bank of Bahamas assistant manager in charge of eSolutions, said that the virtual currency, known as ‘Sand Dollar,’ is set to enhance financial inclusion, especially the isolated islands within the country.
Chen explained that most people on those isolated islands have no access to banking and digital payment infrastructure. Based on reasoning that the central bank came up with a customized solution that will solve the problem while allowing the country to maintain its sovereignty.
The Sand Dollar transfers will be made using a mobile-based wallet app on users’ phones which will be much easier since more than 90% of the citizens use a mobile phone.
According to the official, the central bank digital currency (CBDC) will adhere to the regulations and rules subjected to the Bahama dollar. Users will have to comply with the anti-money laundering (AML) and know your customer (KYC) rules when it comes to the creation of accounts for the use of the digital currency.
The new virtual dollars will be issued by demand. Chen also revealed that the CBDC would be issued along with the withdrawal of the fiat Bahamian dollars to avoid an oversupply of money in the country.
The Bahamas Central Bank first indicated the desire to introduce a digital dollar in June 2018. At that time, the regulator noted that most smaller islands had witnessed a massive downsizing and closure of commercial banks, which left them with no banking services.
The central bank started a pilot project dubbed ‘project Sand Dollar’ last year in the islands of Exuma and Abaco with a population of 7,314 and 17,224, respectively.
Chen explained that every Sand Dollar would be pegged on the Bahamian dollar pegged on the US dollar.