China will not be the first state to issue a central bank currency. The Bahamas is releasing the Sand Dollar, the first digital currency issued by a country.
The priority for the United States is not to be the first to issue a central bank currency or CBDC. China wanted to get the first mover bonus. But it seems it has lost the race to another nation, the Bahamas.
However, obviously the “Sand Dollar” will not be able to compete internationally with an e-yuan or an e-dollar. Nevertheless, it is the first digital currency in circulation today.
The Sand Dollar project announces the availability of this CBDC to all residents of the country. Thus, and for the first time in history, 393,000 people now have access to this official currency of a national central bank.
The Bahamian authority is targeting more specifically the use of smartphones. For their Sand Dollar payments, users, therefore, need to have an electronic wallet for smartphones approved by the Central Bank.
And as the CBDC Bahamas website states, this digital currency allows transactions to be made with any merchant via the official e-wallet. The central bank specifies that the associated costs are “negligible”.
To offer this new service to its citizens, the Bahamas relies on NZIA, a specialist in decentralized wireless payments and blockchain. However, the provider is working with technology partners, including IBM and Zynesis.
“Sand Dollar promises to modernize the country’s digital payment capabilities, increase transaction efficiency and reduce service delivery costs. But the real benefit is the opportunity to bring real financial inclusion to the people of the Bahamas,” NZIA said.
The CBDC project did not come out of thin air. It has been in the works at the Central Bank for several years now. In 2019, a pilot program was born through the provision of 48,000 Sand Dollars to a part of the population.
Each Sand Dollar is backed by the Bahamian dollar, itself backed by the U.S. dollar. And the development of financial inclusion in the country is indeed one of the main arguments of the authorities.
This can be explained in particular by the very composition of the Bahamas. Its inhabitants are spread over 700 islands, where not all have access to financial services. The CBDC will therefore help provide “access to digital payment or banking infrastructure” to both under- and unbanked residents.