Inclusive of a digital version of the Bahamian dollar, the Central Bank of The Bahamas has defined several evolved objectives for the Bahamian payments systems. On some levels The Bahamas is positioned to use new technology to accelerate this transformation. It brings into focus the need for new policies and regulatory reforms to address best practices in the digital supply of financial services, consumer protection in its multifaceted forms, cybersecurity, and more. There are multiple, complementary objectives within its digitization and reform initiatives.
These include:
- Making the payments system more efficient.
- Using technology to achieve more inclusive, cost affordable, even access to financial services, across all islands of The Bahamas; providing access that avoids discrimination on the basis of immigration or residency status.
- Strengthening national defenses against uses of the financial services infrastructure for money laundering and other illicit ends; including activities that thrive more easily in cash intensive environments.
Project Sand Dollar highlights
Through Project Sand Dollar, the central bank will develop and pilot a general purpose, digital version of the Bahamian dollar — that is, with both wholesale and retail applications. As the draft Central Bank Bill anticipates, the Bank would have statutory authority to issue currency in digital form and to develop regulations to govern the instrument.
The pilot would allow the Bank to enhance the digital system before it is deployed nationally. To stay focused on the challenges that an archipelago poses, and to tackle gaps in access to services in remote communities, Exuma has been identified as the pilot community. The Bank will also explore how to enlist other selected islands that have suppressed or no banking presence.
The digital representation of the B$ will be identical to, and not a separate version of the currency. It will align with all of the statutory rules that govern existing liabilities of the Central Bank; always exchanged at one for one with existing notes, coins and balances. The design will also incorporate best international practices around AML and CFT risks. Anonymity is not a feature. This framework will rely intimately on the national identify infrastructure, when permitting users to hold and exchange digital money.
At the onset, it will use KYC and identity features incorporated into the system design, and adopt the wider public identity system as it becomes available. A blockchain infrastructure has been proposed for the digital currency, with performance capabilities that would adequately satisfy the Central Bank’s requirements for swift processing of payments.
There will be an extensive public education process for all stakeholders potentially impacted by this transformation. Also, from the outset, this project will engage with banks and other payment services providers, so that interoperability standards can be perfected.