The Bahamas is preparing to introduce legislation requiring commercial banks to support its 'Sand Dollar' central bank digital currency (CBDC). This move aims to boost the Sand Dollar's adoption, which has seen a less-than-ideal uptake since its introduction in 2020.

Lagging Adoption

In a June 2 report from Reuters, John Rolle, the governor of the Bahamas central bank, said the adoption rate of the Sand Dollar has been disappointing.

He noted that commercial banks will soon be legally required to distribute the digital currency, and this mandate will be enforced within the next two years.

"We foresee a process where all commercial banks will eventually be in that space, and they will be required to provide their clients access to the central bank digital currency," Rolle added.

Despite its early introduction, the Sand Dollar accounts for less than 1% of the currency in the Bahamas. The total volume of Sand Dollar wallet top-ups fell dramatically from $49.8 million between January and August 2022 to just $12 million in the same period last year.

Technical Overhauls

Requiring commercial banks to distribute the Sand Dollar will necessitate significant technological overhauls for individual banks. However, the Bahamas central bank insists that boosting the adoption of CBDC and mobile payments is crucial for the nation's financial future.

Global Context

The Bahamas is not alone in facing challenges with CBDC uptake. In China, several government workers enrolled in the CBDC pilot program prefer to cash out their digital 'e-CNY' for traditional cash.

They cite limited usability and concerns about government surveillance. Similarly, Nigeria, the pioneer of CBDCs in Africa, is experiencing similar issues with adoption.

The Bahamas' move to mandate commercial bank support for the Sand Dollar could set a precedent for other nations grappling with low CBDC uptake.

As digital currencies become more prevalent, the global financial community will closely watch such initiatives' success.