The Bahamas will launch a digital currency nationwide next month, according to announcements from the country's central bank. If the rollout proceeds as planned, the nation will become among the first
The Bahamas will launch a digital currency nationwide next month, according to announcements from the country's central bank. If the rollout proceeds as planned, the nation will become among the first to deploy such a currency, beating major economies, including China, to the milestone.
The central bank designed the digital currency, known as a CBDC, to address a persistent challenge across the archipelago: connecting remote island communities to financial services. Chaozhen Chen, assistant manager of eSolutions at the central bank, explained the rationale behind the effort. "A lot of residents in those more remote islands don't have access to digital payment infrastructure or banking infrastructure. We really had to customize the effort and the solution to what we need as a sovereign nation," Chen told Bloomberg in an interview.
Officials will peg the digital currency 1-to-1 to the Bahamian dollar, which has a fixed rate against the US dollar. The central bank will subject it to the same regulatory framework as traditional Bahamian currency, Chen said. The bank plans to impose know-your-customer and anti-money laundering protections on the system to prevent financial crime.
The bank will generate the money supply based on demand from users. Officials plan to circulate the digital currency while phasing out physical Bahamian dollars, preventing disruptions to the money supply.
Work on the project began in June 2018, when the central bank committed to developing a CBDC. At the time, officials cited a specific problem: commercial banks had downsized operations and closed branches in smaller islands, leaving those residents without access to traditional banking services. The central bank launched a pilot program the following year on two islands, Exuma and Abaco, to test the system. Officials released 48,000 units of what became known as the Sand Dollar through the pilot.
Officials declared the pilot a success. In October, they will move the project from the testing phase into full deployment across the islands.
