The Bahamas is one of the thirteen countries that are part of Insular America or the Caribbean Islands. The most populous city is Nassau, its capital, in New Providence Island, which currently has 400,000 inhabitants approximately, which are distributed in the thirty islands that make up the commonwealth. After several internal efforts, The Bahamas became news in the world of finance when it decided to implement its own digital currency called Sand Dollar ($ S), issued by the Central Bank of that country after private financial institutions, to promote inclusive access to regulated payments and other financial services for communities and socio-economic groups that lack sufficient banking services or are located in remote areas.

The value of the Sand Dollar ($S)

A Sand Dollar ($ S) has an equivalence with the current Bahamian dollar, which has its parity with the US dollar. Each Sand Dollar is considered a “liability” of the Central Bank, backed by foreign exchange reserves. After considering the Great Exuma and Abaco banks’ pilot project, the Central Bank of that country implemented it throughout the territory as of October 20, 2020.

The goals of the Sand Dollar

The objective of this digital currency is to allow non-discriminatory access to payment systems, regardless of the age and immigration status or residence of the person; strengthen national defenses against money laundering, banknote counterfeiting, and other illicit acts, besides reducing the negative effects of the misuse of cash. Another of its objectives is to increase the payment efficiency of the current banking system of the island, through safer transactions and faster settlement, in addition to achieving greater financial inclusion, effectiveness, and access to the financial systems of The Bahamas.

Advantages of implementing the Sand Dollar

Among the major advantages of this digital currency are:

  • Use of online banking: The use of online banking services is increasing, for example, 20% of the population currently does not have a bank account, besides people who cannot use electronic banking.
  • No more trips to make cash payments: Previously, people had to travel by boat to other islands to make cash payments, which sometimes meant that the trip was impossible to make due to the suspension of public service or the weather, especially in hurricane season.
  • Increased security against theft: In theory, this digital currency “cannot be stolen” as the balances are in the Central Bank’s computer; this system also allows for better monitoring in case of investigating unjustified or unallowed expenditures.
  • Financial support: This digital currency can keep detailed records of its operations; being able to keep the client’s financial history, in terms of income and expenses, is a good support when wanting to request loans at the bank.
  • No transactions cost: Transactions carried out with the sand dollar are at no cost to the client.
  • Possibility of increasing the balance: There is the possibility of increasing the balance and the maximum monthly expense, besides linking the user’s account with private banking (with prior authorization from the Central Bank); in the case of commerce, this linkage is mandatory.

Disadvantages of the Sand Dollar implementation

Among the major disadvantages of the Sand Dollar is that it is only valid for national transactions; i.e., you cannot make purchases in other countries nor make payments on online sites that use a currency other than the Bahamian dollar; another disadvantage is that there is a great dependence on the central bank of that country, which can also affect future decisions on the policies implemented for that currency.

This example from The Bahamas could reference other countries to adopt a similar model, thus giving citizens the possibility of having universal access to high value-added and inclusive financial services.

What do you think about this topic? Do you think this implementation of a digital currency in The Bahamas promotes the inclusion of citizens?

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