The Central Bank of The Bahamas plans to mandate all local banks to adopt the country’s central bank digital currency (CBDC) by 2026, aiming to boost the “Sand Dollar’s” integration into the financial system. The directive will require local banks to ensure their clients have access to the CBDC, according to Central Bank Governor John Rolle.
Background and Current Usage
The Sand Dollar was launched in 2020 to expand banking access and improve financial inclusion within the Bahamas. Despite its initial promise, the digital currency’s adoption has been slow, with current usage accounting for less than 1% of the currency in circulation. Additionally, wallet top-ups have significantly declined from $49.8 million to $12 million as of August 2023.
Comparison with Global CBDC Challenges
The Bahamas is not alone in facing challenges related to CBDC adoption. Countries like Nigeria and Jamaica also report minimal usage of their digital currencies. Similarly, India’s digital currency, the e-rupee, saw a decline in activity after initial boosts from local banks. The Reserve Bank of India achieved a milestone of 1 million retail transactions only through financial incentives to users. Once these incentives were withdrawn, daily transactions dropped significantly, highlighting a lack of organic demand.
Future Plans and Considerations
Governor Rolle has indicated that the Bahamas is unlikely to provide financial incentives to boost Sand Dollar usage, differing from the approach seen in India. The central bank aims to enhance CBDC adoption through regulatory mandates and integration with existing banking services.
This move towards mandatory CBDC adoption reflects a broader global trend of central banks exploring digital currencies to modernize financial systems, despite facing significant challenges in user adoption and sustained usage.
The Central Bank of The Bahamas’ decision to mandate local banks to adopt the Sand Dollar by 2026 marks a significant step towards integrating digital currency into the national financial system. The success of this initiative will depend on overcoming current adoption challenges and ensuring that the CBDC meets the needs of the Bahamian population.
