The Bahamas plans to force banks to offer access to the central bank’s digital currency, which will be deployed in 2020. There are still some obstacles to overcome.
The Bahamas became the world’s first country to issue a central bank digital currency (CBDC) known as the “sand dollar” in 2020. To increase the acceptability of digital money, the Caribbean nation’s central bank is now considering legislation forcing commercial banks to allow access to it. This was reported by Reuters on Monday, citing the Bahamas’ central bank governor.
Bahamas, Pioneer of Central Bank Digital Currency
Central bank president John Rolle, who oversaw the sand dollar’s inception four years ago, told Reuters that adoption remains restricted. According to Rolle, commercial banks are presently being educated on the new legislation, which would essentially force them to utilize the currency.
“We have started signaling our institutions accordingly,” Rolle informed me. “We foresee a process where all commercial banks will eventually have to operate in this area and provide their customers with access to the central bank’s digital currency.” The rules will so go into force in two years.
Sand Dollar Acceptance Challenges
The central bank’s digital currency is available in two forms:’retail’ sand dollars, which the general public may use, and a ‘wholesale’ version, which is solely utilized by financial institutions. If banks are compelled to make sand dollars available, their IT systems will have to undergo considerable adjustments, according to Reuters.
However, the Central Bank of the Bahamas feels that it is critical to encourage CBDC adoption and mobile payments in general. According to experts, one of the issues with CBDCs is that they do not yet provide apparent advantages over other forms of payment. There are also fears that central bank digital money may pave the door for more government control.
The Future of Central Bank Digital Currencies
Sand dollars now make up less than one percent of the currency in circulation in the Bahamas. Wallet replenishments decreased to 12 million dollars in the eight months ending in August last year, down from 49.8 million dollars the previous year, according to Reuters, citing statistics from the Bahamas central bank.
Asking commercial banks to integrate sand dollars into their systems will make them more usable, according to Rolle. However, he admitted that the greater problem is convincing additional stores, restaurants, and companies to accept the sand dollar as payment. Rolle ruled out any financial incentives for using sand dollars or earning interest on them.
If the EU Commission is successful, people and businesses will be able to use the digital euro as legal money within a few years, maybe as early as 2028. The EU Commission initially defined the prerequisites for using the digital euro in a draft law last summer.
The idea was that it would be as private offline as cash. The digital euro is “not a Big Brother project”. In February of this year, the German Federal Office for Information Security (BSI) issued technical recommendations for central bank digital money, in which the authority gave information on “security by design” for “digital money” and recommended the use of various wallets for anonymous payments.
Data protection experts have cautioned that if data protection is not adequately considered while deploying the digital euro, data retention may occur.
