A prepaid card that supports the world’s first central bank digital currency (CBDC), dubbed the Sand Dollar, has launched in the Bahamas.
The Central Bank of the Bahamas launched its CDBC in October last year, becoming the first fully deployed digital version of a country’s fiat currency. At that time, Sand Dollars – designed to encourage digital payments and also to help with financial inclusion – could be used only by registered users through a smart-phone app at selected merchants.
The archipelago nation has now also become home to what is described as the ‘world’s first’ CBDC-linked prepaid card, which has been created through a partnership between the central bank, US-headquartered Mastercard and local mobile payments firm Island Pay.
Using the app, citizens with Island Pay mobile wallets are now able to decide if they want to transact in Sand Dollars or traditional Bahamian Dollars (the two have the same value), then pay for goods and services anywhere that Mastercard is accepted on the 700 Bahamas islands – and worldwide.
‘Encouraging fintech developments’
“We welcome this approach to combining digital currency use with access to foreign currency and other payment outlets,” said central bank governor John Rolle. “The Central Bank of The Bahamas will 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.”
Island Pay co-founder Richard Douglas said the prepaid card would “help to democratise access to currency, especially in areas that are currently underserved”, while Mastercard’s executive vice-president of digital asset and blockchain products and partnerships, Raj Dhamodharan, described the partnership as “an example of how the private and public sector can rethink what’s possible, while delivering the strongest levels of consumer protection and regulatory compliance.”
The central bank unveiled details of the-then ‘Project Sand Dollar’ in December 2019, describing it as a continuation of the Bahamian Payments System Modernisation Initiative (PSMI) that began in the early 2000s.
The overall population of the Bahamas, which comprise 700 mostly uninhabited islands located southeast of Florida and north of the Greater Antilles, is about 400,000. The central bank’s assistant manager of e-solutions, Chaozhen Chen, told news agency Bloomberg last year that “a lot of residents in [the] more remote islands don’t have access to digital payment infrastructure or banking infrastructure.”
Consultation on regulation underway
Launch of the prepaid card comes as the central bank consults on proposed legislation for the regulation of the provision and use of ‘central bank-issued electronic Bahamian Dollars’ (the Sand Dollar).
The aim of the ‘Central Bank (Electronic Bahamian Dollars) Regulations 2021’ – for which the consultation was announced on 15 February – is to develop a legislative framework for the bank’s oversight of digital wallet providers ‘in line with international best practices’.
The 29-page consultation paper includes a section on financial inclusion, pointing out that helping unbanked citizens, particularly in the ‘under-served’ Family Islands, is among the Sand Dollar programme’s priorities. So, the proposed regulations will require every wallet provider to provide basic wallet services to all citizens at no cost; to provide the central bank with its strategy to distribute payment services to residents in the Central, South Eastern and North Western Bahamas, and to report on financial inclusion data that, at a minimum, covers gender and citizens’ island of residency; and, also, they would empower the central bank to designate a wallet provider to provide wallet services to businesses, churches and organisations in localities where they have not been offered (or withdrawn).
The central bank says that it has also reviewed existing legislation that impacts wallet providers to identify any potential areas of inconsistency with the draft regulations and, as a result, is also proposing consequential amendments to its Payment Systems Act and Computer Misuse Act. The consultation period ends on 31 March.
Mastercard announced a proprietary virtual testing environment for central banks to evaluate CBDC use cases in September last year.