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The Bahamas Racing Ahead with the Sand Dollar

When you think about national digital currencies, countries like China and Sweden immediately spring to mind, but a tiny Caribbean Island is making waves.

The ‘Sand Dollar’ has just been rolled out to the second island in the chain, putting the Bahamian central bank way ahead of most countries and aims to roll out the digital currency to all islands by the end of 2020, designed to give inhabitants easier access to financial services in light of economic difficulties following damage to infrastructure following Hurricane Dorian.

Now being trialed on the island of Abaco, the Sand Dollar is seen as a way to bring some normality following the devastation many residents have endured. Each Sand Dollar is the exact equivalent of its paper version and fully backed by the external reserves of the Central Bank.

Deputy Prime Minister and Minister of Finance Kevin Peter Turnquest clarified that it is for ‘those people who had sustained great property damage and even lost everything, this would give them easier access to financial services.’

This is another great example of a country embracing currency digitization which will allow consumers in the region to make payments through their mobile devices without incurring fees in direct peer-to-peer transfers. A key component being trialed is the ability for the Sand Dollar to be used offline, something which is vital in case of a natural disaster and has to potential to revolutionize the way business is conducted across the islands. The combination of multi-factor authentication and biometrics keep the Sand Dollar app secure on mobile devices. Still, it is vital to note that the Sand Dollar is not anonymous, but it is confidential.

While world superpowers continue the pursuit of their own digital currencies, this initiative in the Bahamas may prove to be a template for other countries to follow.

Image via Shutterstock

The Bahamas Central Bank Digital Currency Will Be Rolled Out in October

The race to be the first country with a working central bank digital currency (CBDC) has been in full swing, but while all eyes have been on the United States and China—the Bahamas has just announced its own state-backed virtual currency will be ready by October.

The Bahamas will be ready to roll out working CBDC by next month, and while it will not have quite the same implications as a Digital Yuan or Digital Dollar for the global economy—the Sands Dollars will be the first state-backed virtual currency.

As reported by Bloomberg, the digital currency or ‘Sand Dollars’ aimed to create more financial inclusions among the many remote islands of the Bahamas.

Chaozhen Chen, Assistant Manager of eSolutions at the Central Bank of the Bahamas said:

“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 stated that the CBDC or Sands Dollars will fall under the same regulation as the Bahama dollar, and as such will be subject to the same anti-money laundering (AML) and know-your-customer (KYC) standards.

The Bahamas digital dollar project was first announced by the Central Bank of the Bahamas in June 2018 as many of the smaller and remote islands in the tropical archipelago are cut off from banking services.

The Project Sand Dollar pilot was launched by the government of the Bahamas last year and the digital currency was trialed on the smaller islands of Exuma and Abaco which have a combined population of fewer than 25,000 people. The pilot was hailed as a success as 48,000 Sand Dollars were issued, with each pegged to the Bahamian dollar—which is itself pegged to the United States dollar.

The Sand Dollars or central bank digital currency will be created to match demand—the digital state-backed virtual currency will be issued as physical Bahamian dollars are retired, to maintain control of the monetary supply.

Marshall Islands—No Central Bank, No Problem

As reported back in March 2020, the Republic of the Marshall Islands (RMI) has also revealed plans to have the world’s first sovereign digital currency, even specifying that it will be built using Algorand’s technology. But it won’t be a central bank digital currency, as RMI has no central bank.

Plans for the Marshallese Sovereign (SOV) were first announced in February 2018 following a vote by the nation’s parliament in favor of proceeding with the plan.

According to a government whitepaper released in September 2019, the RMI has accessed the world markets via the US dollar and has never attempted to develop and maintain its own national currency as the cost of running its own central bank would be too great for the small and remote nation.

According to the research, digital ledger technology has changed the cost-benefit equation. It allows the small countries to combine the best features of traditional government-issued currency and cryptocurrency “leapfrogging obsolete stages of monetary development.”

Bahamas Looks to Deploy its CBDC The Sand Dollar Across Borders

The Central Bank of the Bahamas (CBOB) has revealed an ambitious use case for its Central Bank Digital Currency (CBDC) ahead of the national roll-out on October 20. The CBDC has been dubbed the Sand Dollar.

Sand Dollar To Find Relevance Across Borders

Speaking at an organized virtual presentation by the Bahamas Chamber of Commerce and Employers’ Confederation for businesses ahead of the Sand Dollar rollout, CBOB’s Bobby Chen, assistant manager of electronic solutions said that plans are in place to aid the integration of the Sand Dollars with other global currencies.

Referring to the Sand Dollars, Chen noted:

“At the moment, it is currently only used in a domestic setting, but eventually we are working on a solution that will make it interoperable with other global currencies.”

Other emphases have also been pointed out to highlight the unique functionalities of the Sand Dollars which will aid it in its proposed proposition to permeate the Bahamian economy.

CBOB Head of Banking Cleopatra Davis said:

“Some of the central strategies around Sand Dollar is the API card-less onboarding. This became extremely important during the time of COVID-19 because we realized it’s not business as we know it prior to COVID-19. Mobility and face-to-face may not be as easily accessible […] through the API card-less onboarding you’re going to be able to have access to Sand Dollar without physically entering a business place to do so.”

In order to meet with the environmental hazards prevalent in the Bahamas including Hurricane Dorian, the Sand Dollars has also been designed to have offline functionalities.

Bahamas May Be The First to Launch a Legal Tender CBDC

Should the Central Bank of the Bahamas meet up with it’s scheduled plan to roll out the Sand Dollars this month, Bahamas will rank as the first country to launch a CBDC that can be categorized as a legal tender.

The Bank of Lithuania earlier launched a blockchain-based digital collector’s coin dubbed LBCoins as part of its test for its soon to be launched CBDC.

Mastercard Tapped to Issue Prepaid Cards Linked to Bahamas’ Central Bank Digital Currency

The Central Bank of The Bahamas, Island Pay local mobile payment service provider, and Mastercard have partnered to give the people of Bahamas greater flexibility when transacting with the Sand Dollar – Bahamas’ central bank digital currency.

The new program is designed to enable citizens to instantly convert the central bank digital currency into cash (traditional Bahamian dollars). They can even pay for goods and services anywhere, as Mastercard prepaid cards are accepted on the Islands and across the globe. Mastercard technology, combined with Island Pay’s digital platform and wide merchant acceptance, has the potential to assist in modernizing the overall payment systems and reducing the operational distribution cost of cash in the country.

John Rolle, the Governor of the Central Bank of the Bahamas, said:

“We welcome this approach to combining digital currency use with access to foreign currency and other payment outlets. The Central Bank of The Bahamas will continue to encourage fintech developments that tie into the Sand Dollar infrastructure while allowing us to satisfy the best global practices for regulation of the space.”

This CBDC initiative is in line with Mastercard’s program, as the payments giant aims to work with central banks. Last September, Mastercard created a virtual testing program that allowed central banks to test the use-cases of their CBDCs.

Raj Dhamodharan, EVP of Digital Asset & Blockchain Products & Partnerships at Mastercard, said: “This partnership is an example of how the private and public sector can rethink what’s possible while delivering the strongest levels of consumer protection and regulatory compliance. We’re creating a lot more possibilities for governments, shoppers and merchants, allowing them to transact in an entirely new form of payment.”

The Role of Mobile Phone-Based CBDC

Last October, Bahamas became the first country to launch Central Bank Digital Currency, a digital version of the traditional cash (Bahamian dollar). The Central Bank of The Bahamas made the sand dollar (the national digital currency) to be transferable via mobile phones, making the CBDC easy to use for the local citizens. The digital currency is usable even while offline, thus making it a good payment option for residents without an internet connection.

Bahamas’ central bank pinpointed the offline availability as a crucial feature when designing and developing the Sand Dollar. The feature is essential as the archipelagic State is prone to natural disasters. For example, when Hurricane Dorian hit the island in September 2019 and destroyed billions worth of property, most people’s internet connection was obliterated.

Bahamas’ Sand Dollar CBDC Begins Facial-Recognition Rollout to Authorize Mobile Payments

Sand Dollar CBDC has continued to advance its usage and started addressing the issue of user authentication.

SunCash, a financial institution authorized to provide Sand Dollars in the Bahamas, announced on Thursday that it has partnered with PopID Inc software company to allow holders of the Bahamian Sand Dollar to use PopID’s PopPay platform to authenticate themselves.

It is the first time in history that consumers can now use the PopPay face verification platform to buy goods and services with a CBDC (central bank digital currency).

Bahamian citizens can now link their SunCash wallets to PopPay to enable face pay transactions using their Sand Dollars, a central bank digital currency in the Bahamas.

This will allow consumers to spend Sand Dollars at merchants (businesses) accepting SunCash payments using their faces for authentication.

Likewise, various local and global brands accepting digital Sand Dollars through the SunCash platform will be authenticated by PopPay.

PopPay’s technology allows merchants to verify customers’ identities with a facial scan. The technology links any payment method, including digital currencies, direct bank transfers, and debit/card cards, to the user’s unique facial characteristics.

Reports show that SunCash has over 55,000 active wallet holders, one-seventh of the population of the Bahamas, and more than 1,000 merchants accept the wallet.

Desmond Pyfrom, CEO of SunCash, talked about the development and said: “PopPay’s cutting edge technology provides a more consumer-friendly, seamless, and secure experience for SunCash’s users. With the integration of the PopPay platform into the SunCash App, Bahamian consumers can now quickly, efficiently, and safely use the digital Sand Dollar to purchase food and other products even if the consumer does not have a functional smartphone or an internet connection.”

Digitizing Retail Payments

Private digital currencies are storming financial markets, and as a result have prompted central banks globally to create their own, legally-backed digital tokens.

The Central Bank of The Bahamas issued the Sand Dollar- a digital iteration of the Bahamian Dollar, in October 2020.

With Sand Dollar, local consumers can receive and make payments electronically from a digital wallet using either their smartphones or a physical payment card they can manage via merchants across the nation.

Residents can open digital currency accounts, store the CBDC in an e-wallet approved by the central bank and use it for payments. The records collected during daily operations, like income and spending information, can support applications for micro-loans.

An IMF FinTech report showed that in late 2021, the number of active Sand Dollar wallets was about 20,000 in a population of about 400,000.

The Bahamas Regulator Denies Requesting FTX To Manufacture New Tokens

The allegations made by FTX debtors have been rejected by the Securities Commission of The Bahamas (SCB), which also expresses worry over the fact that the inquiry has been hampered.

According to a statement that was made public on January 3rd, the SCB had to provide clarifications on significant inaccuracies that were made by John J. Ray III, the representative of the United States-based FTX debtors, in press and court files.

The Chapter 11 Debtors had made a public challenge to the Commission’s assessments of the value of digital assets that had been moved to digital wallets that were in the authority of the Commission in November 2022.

It stated that these assertions were based on inadequate information and that the debtors did not exercise due diligence by obtaining information from the Joint Provisional Liquidators. Additionally, it claimed that these statements were based on incorrect information.

During a court filing before the United States House of Financial Services Committee, the CEO of FTX, John J. Ray III, testified under oath and made public statements alleging that the Commission instructed FTX to mint a substantial amount of new tokens. This allegation was made in the statement.

The Chapter 11 Debtors have also said that the digital assets that are in the custody of the Commission and held in trust for FTX customers and creditors have been stolen. However, the Chapter 11 Debtors have not provided any evidence to support their assertions.

The Commission expressed its worry that its investigation is being hindered because the Chapter 11 Debtors are refusing to let the Court Supervised Joint Provisional Liquidators access to FTX’s AWS System. The Commission is concerned that this denial would jeopardize the inquiry.

The announcement made by the Bahamian securities regulator follows news from court filings made in December 2022, in which FTX lawyers claimed that the government of the Bahamas reportedly requested that the former CEO of FTX, Sam Bankman-Fried (SBF), issue a new cryptocurrency controlled by local officials. The announcement comes after the news was made public.

According to the original allegations, the Bahamas regulator allegedly requested that SBF issue new digital assets with a total value of hundreds of millions of dollars.