It’s yet another development with Central Bank Digital Currencies this week, as more countries and regions hop on the bandwagon. The latest to catch on to the trend is the Bahamas, as officials have confirmed a possible CBDC launch this year.
Digital Payments for Remote Islands
Earlier this week, Chaozhen Chen, the assistant manager of eSolutions at the Central Bank of The Bahamas, confirmed to Bloomberg that his agency would launch a national cryptocurrency in October 2020. Speaking to the news source, Chen explained that the asset – dubbed the “Sand Dollar” — will operate to drive greater financial inclusion across the region. Currently, the Bahamas consists of 700 islands, although only about 30 are inhabited. As Chen explained, improving digital payments access to these islands is one of the new asset’s primary objectives.
“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.”
The Sand Dollar project isn’t entirely new. The Bahamian government first signaled a possible CBDC project in June 2018. At the time, Deputy Prime Minister and Minister of Finance of the Bahamas, K Peter Turnquest, explained that most islands had witnessed a retrenchment of banking services. With transportation being much of an inconvenience, the government decided to step in and bolster the digital payments infrastructure and promote easier transactions.
Last year, the government launched the Sand Dollar project with Singapore-based blockchain research company Zynesis and transaction service provider NZIA.io. They also tested the project on Abaco and Exuma — two individual islands with populations of 17,225 and 7,314, respectively.
Chen added that transfers with the asset would be done using mobile devices, as the Bahamas has shown a predominant mobile phone penetration level. He also pointed out that the asset will be under the same set of compliance regulations as the Bahamian Dollar.
Thus, everyone who creates a virtual account to use the asset will have to follow Anti-Money Laundering and Know-Your-Customer guidelines.
Brazil’s CBDC is Coming in 2023
The Bahamas is the second developing economy that has committed to CBDC development this month. Last week, local news source Correio Braziliense reported that Banco Central — Brazil’s central bank — had confirmed a CBDC is coming before 2023. Roberto Campos Neto, the bank’s president, has stated that they’ve undertaken measures to improve the country’s financial system. Naturally, they chose the option to digitize the currency. “A CBDC distinguishes itself from cryptocurrencies without national trust, like Bitcoin, because it is just a new form of representation of the currency already issued by the national monetary authority,” Neto added.
The Brazilian central bank already laid the groundwork for a possible CBDC, too. In August, it announced a research group that would examine how digital currencies could fit national payments and its impacts on the country’s economy. Neto said he expected a report on the group’s findings within 6 to 12 months. If that works out, it means they will have a little over two years to develop the asset. That seems possible.