Bahamas launches digital currency

NASSAU, Bahamas, CMC – The Central Bank of The Bahamas has introduced a digital version of the local currency, starting with a pilot phase in Exuma.

The pilot is to be extended in the first half of 2020 to Abaco.

The central bank said that the initiative has been named Project Sand Dollar.

“This is a continuation of the Bahamian Payments System Modernization Initiative (PSMI), which began in the early 2000s. The Bahamian PSMI targets improved outcomes for financial inclusion and access, making the domestic payments system more efficient and non-discriminatory in access to financial services,” the central bank said.

It said although average measures of financial development and access in country are high by international standards, pockets of the population are excluded because of the remoteness of some communities outside of the cost-effective reach of physical banking services.

It further said more onerous customer due diligence standards for money laundering and combating the financing of terrorism towards international tax compliance have also resulted in forms of exclusion, including more recent responses to tighter “know your customer” systems introduced to preserve international correspondent banking relationships.

“As recent policy and regulatory reforms have begun to tackle these barriers, the central bank is intent on accelerating payments system reform, admitting new categories of financial services providers and using the digital payments infrastructure to make the supply of traditional banking services accessible to all segments of the population.”

The bank said there is room to improve both knowledge and awareness of financial products and responsible financial behaviour.

It also said opportunities also exist to reduce transaction costs for businesses and consumers.

“Feedback from Exuma shows a high penetration of mobile phone usage and likelihood that a higher share of the population would be willing to use digital financial services including electronic payments. The public though will need more assurances around the safety of conducting online transactions. The digital currency design and public education will tackle these issues.”

It said that most of the benefits of introducing a digital currency are still unquantifiable.

However, it argues that they include a potential suppression of economic costs associated with cash usage and benefits to the Government from improved expenditure and tax administration systems.

“It is expected that the government, as participant and user, would be a strong promoter of digital payments adoption alongside non-bank payment services providers as the initial lead intermediaries in this space.”

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