Bahamas mandates banks to adopt CBDC

The Bahamas, the first country to issue a central bank digital currency (CBDC), is drafting regulations to mandate commercial banks to support its e-money, the Sand Dollar, to boost adoption, according to central bank governor John Rolle.

The Bahamas’ pioneering role with the Sand Dollar, launched in 2020, is under close watch by over 130 countries exploring their digital currencies. Despite the initial limited uptake, Rolle indicated that new regulations will soon compel banks to distribute the digital currency. These rules are expected to be enforced within two years.

Rolle emphasised that all commercial banks would eventually need to provide their clients access to the CBDC. This push towards mandatory distribution is seen as essential to increase the use of the Sand Dollar and mobile payments in general.

Currently, the Sand Dollar represents less than 1 per cent of the Bahamas’ currency in circulation, with wallet top-ups significantly decreasing. Other countries like Nigeria and Jamaica, which have also launched CBDCs, are experiencing similar low usage rates.

Challenges include a lack of clear advantages over existing payment methods and public concerns about government surveillance. Rolle believes that requiring banks to integrate the Sand Dollar into their systems could enhance usage, but the ultimate goal is broader acceptance by merchants and businesses.

Unlike India, which offered incentives during its e-rupee trials, the Bahamas does not plan to provide financial incentives for using the Sand Dollar.

Attribution: Reuters.