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The central bank of the Bahamas is set to launch a pilot of its digital currency. It is however not a stablecoin and will not replace fiat.
The Commonwealth of the Bahamas is the newest country to adopt its own digital currency. Starting today, residents of the Exuma district will have access to a pilot run of the country’s central bank digital currency (CBDC).
According to an official press release published on Tuesday, December 24, the pilot run is called the “Project Sand Dollar” as the CBDC is called the “Sand Dollar”. The announcement also states that the Bahamas digital currency furthers the Bahamian Payments System Modernization Initiative (PSMI). The PSMI started back in the early 2000s and still continues periodically to this day.
The Sand Dollar will begin in Exuma and will later spread to the Abaco Islands in northern Bahamas. The government plans for this to be an organic spread that will get there in the first half of 2020.
It is, however, important to note that the Bahamas digital currency is simply a digital version of the Bahamian Dollar. This was highlighted in an official document for the Project Sand Dollar, by the Central Bank of the Bahamas. The document specifies that Sand Dollar is not a cryptocurrency and is not built like any other digital currencies available today. Even though it will have the same value as the Bahamian Dollar, it is also not a stablecoin. The Sand Dollar has no external reserves backing the currency.
Why The Bahamas Digital Currency?
The press release suggests that issuing a digital currency is necessary because there are parts of the population that don’t have access to banks. The central bank of the Bahamas is concerned with how inadequate accessibility is in the region. It states that:
“…Pockets of the population are excluded because of the remoteness of some communities outside of the cost effective reach of physical banking services.”
It also states that newer standards for strict AML and CFT compliance have become problems. The need to comply with these requirements has further reduced accessibility.
The official document also suggests that using the Sand Dollar would be safer and less risky in general, for citizens:
“A widely adopted CBDC would place users at less risk of violent crimes that target holders of cash, and potentially reduce security and insurance costs associated with keeping cash on business premises.”
Limits On The CBDC
There are a few limits on the usage of the Sand Dollar. Businesses are not allowed to have any more than $1 million in their wallets. They are also not allowed to use more than one-eighth of their annual figures, in monthly transactions. For individuals, a maximum of $500 is allowed in their wallets. If these individuals do more “enhanced due diligence”, they will, however, be allowed a maximum holding amount of $5,000 with $100,000 as an annual limit.
Authorities say they will “vary these limits over time as may be necessary.”