Prior to launch, the Central Bank of the Bahamas (CBOB) had previously conducted two pilot tests on the Bahamian islands of Exuma and Abaco. The pilot programs are assumed to have been successful given that the CBOB has moved ahead with the launch.
Project Sand Dollar is part of the Bahamian Payments System Modernization Initiative (PSMI) established in the early 2000s. The initiative “targets improved outcomes for financial inclusion and access, making the domestic payments system more efficient and non-discriminatory in access to financial services”.1 With the hundreds of islands that make up the Bahamas, access to financial services on many of the remote islands has proven to be challenging; and especially so when the region is devastated by a hurricane or other natural disaster. The Sand Dollar offers a digital payment and custody solution to those that are geographically isolated as well as segments of society that have been traditionally unbanked.
CBOB has indicated that the Sand Dollar will be rolled out in two phases. Phase one (which has now launched) includes three tiers of accounts. The first tier will focus on lower value wallets and will have the least stringent KYC requirements. The second tier will focus on personal accounts and will require KYC levels similar to what is required for a bank account. The third tier will focus on business accounts and will be subject to a higher level of KYC. Phase two will focus on the rollout of the Sand Dollar to the government and public utilities sector beginning in the first quarter of next year.
The CBOB has contracted with NZIA Limited (a global provider of payment systems) which is providing the tech infrastructure and for the Sand Dollar. Some of the system highlights include: offline functionality, instantaneous validation, PSP customized solutions, multi-factor authentication, and fraud detection. While the Sand Dollar will initially only be available domestically, the CBOB has indicated that they are working on making the Sand Dollar interoperable with other global currencies.
According to the CBOB, all regulated Bahamian financial institutions are eligible to become authorized financial institutions (AFIs) which are permitted to sponsor mobile payment wallets to the public and establish clearing accounts with the Central Bank. Eligible institutions include credit unions, commercial banks, central banks, credit unions, money transmission businesses, and payment service providers. All AFIs will be required to develop adequate tech infrastructure and undergo a comprehensive security assessment by an independent party prior to the integration of their systems with the Sand Dollar platform. Once established, AFIs will be able to offer their own custom apps or a generic Sand Dollar app.
Other Central Banks will be watching the Sand Dollar with great interest as they continue to advance their own central bank digital currency (CBDC) programs. If the Sand Dollar proves to be successful over the following months, we may see some other early adopters launch their own CBDCs.