Precisely one year on from the launch of the world’s first central bank digital currency (CBDC) – the Sand Dollar in the Bahamas – two locally-based companies have teamed up to claim the first use of a CBDC for payroll.
Mobile payments firm Island Pay and a food-delivery company, Bahama Eats, have announced what they describe as a ‘ground-breaking’ partnership in the archipelago nation.
With effect from this month, Bahama Eats employees who have downloaded the Island Pay digital wallet to their smart-phones are being paid their salaries in CBDC.
Island Pay’s co-founder Richard Douglas described the development as constituting “what we believe is a major step in the global advancement of central bank backed digital currencies”.
Most major nations are exploring the possibility of following the Bahamas’ lead in launching a CBDC, with China widely seen as most progressed. But it will almost certainly be some years before most major nations actually launch a CBDC – for example, a potential ‘digital pound’ in the UK or ‘digital dollar’ in the USA. Nonetheless this ‘use case’ of a CBDC is likely to catch the eye of the increasing number of government officials and central bankers worldwide who, as well as exploring technical questions and challenges, are mapping out the opportunities presented by CBDCs.
‘Next stage in evolution of CBDCs’
“Island Pay is all about democratising access to money,” said Douglas. “Evolving our technology to be used for payroll payments represents the next stage in the evolution of the digital wallet and CBDCs.”
At present about 60 Bahama Eats team members are being paid fortnightly in CBDC via their Island Pay digital wallets.
The companies believe that using CBDC for payroll is secure; more convenient for both Bahama Eats as a business and its team members, who have previously been paid in cash or even by cheque; and that it saves Bahama Eats money in bank fees and payroll administration time (and related costs).
“In an era where cost savings, efficiency and conservation of time are more critical, partnering Island Pay for our payroll needs was the obvious choice,” said Bahama Eats founder and managing director Gershwin Greene. “Using our employees’ digital wallets to pay their salaries into provides us with the ability to give them immediate access to their monies while relieving us of traditional administration costs and resources.”
The companies first teamed up five months ago to enable Bahama Eats’ customers to use their Island Pay digital wallet to have food delivered through Bahama Eats’ app, paying in either traditional Bahamian Dollars or Sand Dollars (the two have the same value). Island Pay’s managing director said at the time that his company had more than 22,000 Bahamians using its Sand Dollar-integrated digital wallets.
CBDC-related developments to date
Island Pay, which was founded in 2018 and now wants more businesses to follow Bahama Eats’ lead and use CBDC for their own payrolls, has already partnered US-headquartered Mastercard to launch a prepaid card to support the Sand Dollar.
The card was described as the ‘world’s first’ CBDC-linked prepaid card when it launched earlier this year. Citizens with Island Pay digital wallets can decide if they want to transact in traditional Bahamian Dollars or Sand Dollars, then pay for goods and services anywhere that Mastercard is accepted in the Bahamas – and worldwide.
Central Bank of the Bahamas governor, John Rolle, said at the time that the institution would “continue to encourage fintech developments that tie into the Sand Dollar infrastructure, while allowing us to satisfy best global practices for regulation of the space.”
The central bank consulted on proposed legislation for the regulation of the provision and use of ‘central bank-issued electronic Bahamian Dollars’ (the Sand Dollar) earlier this year. The central bank also issued a tender for ‘communication consultancy services’ for its Sand Dollar work in April. It launched its CDBC in October 2020, becoming the first fully deployed digital version of a country’s fiat currency.
The overall population of the Bahamas, which gained independence from the UK in 1973 and comprise 700 mostly uninhabited islands located southeast of Florida and north of the Greater Antilles, is about 400,000.
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‘CBDC-linked prepaid card debuts as Bahamas central bank consults on regulation’ – our news story (23 February 2021) on the launch of the Island Pay-Mastercard CBDC-linked prepaid card
‘Bahamas central bank readies “Sand Dollar” as sovereign digital currency’ – our news story (22 September 2020) ahead of the CBDC’s launch