How the Tiny Bahamas Beat Global Giants in the E-Currency Race
Unlike cryptocurrencies, which are designed to be anonymous and free of ties to monetary authorities, CBDCs are digital fiat—the sand dollar is an extension of the Bahamian dollar. Traded online and over mobile phones, it aims to dramatically accelerate digital transactions in the Bahamas by breaking down barriers between disparate payment platforms. A government-backed common currency will permit rival mobile wallets, which often use proprietary tokens, to transact more easily with competitors.
The man behind the digital push is John Rolle, 54, who has served as the country’s central bank governor since 2016. Born on Andros Island, Rolle began working in various roles at the bank as early as 1990, but went abroad to pursue graduate studies in economics at American University in Washington and Carleton University in Ottawa. In addition to his central banking experience, he spent three years as a senior adviser to the International Monetary Fund’s executive director for Canada, Ireland, and the Caribbean and three years at the Bahamian Ministry of Finance. Rolle spoke with Bloomberg Markets in early May about his country’s experience with the sand dollar. The interview has been edited for clarity and length.
JIM WYSS : How did the sand dollar project begin?
JOHN ROLLE : We were in a long process of modernizing our payment systems and identified the need for new payment service providers. We needed a payment platform where you could have all of these providers connect and communicate.
In an island geography it’s very hard to provide financial services through a physical channel. The cost considerations have meant that banks in some cases refused to service some of our rural “family islands.” Those communities can eventually piggyback off this [digital] infrastructure to communicate and interact with traditional financial-service providers. That’s not something that we will see on Day 1, but that infrastructure is there, and the regulatory structure is there. It will be possible for financial institutions to confidently provide services through these digital channels, and we now have the safety of a settlement mechanism, the sand dollar.
JW : Did hurricanes and other natural disasters play a role in developing the sand dollar?
JR : After a natural disaster, if you don’t have cash, commerce cannot quickly recover. You’re just reduced to distributing aid in the form of goods. It’s not ideal when people cannot exercise legitimate choice as to what they really need.
After Hurricane Dorian [in 2019], it took banks more than a year to get their branch facilities restored. There are one or two banks that are still in the process of getting back to the state they were in. Commerce in those communities is a little bit hamstrung. If you wanted to quickly set up a system where people could trade credit—or anything of that nature—having the wireless platform enables you to do that.
JW : How many sand dollars are in circulation?
JR : A very small amount, in excess of 200,000. We see it as likely to grow at a rapid pace in the coming months.
JW : Tell us about the private sector’s role in making the sand dollar a reality?
JR : Today we have seven nonbank institutions that have accelerated product development to provide digital wallets and payment wallets. The commercial banks are now moving into that space. So a lot of the energy, even since we released the sand dollar nationally in October, has been those institutions completing the technical tie-in to the platform so they can take advantage of this opportunity. That’s a milestone we crossed in the first quarter of 2021. These providers are now interoperable and able to market their services with the added attraction of having the sand dollar, which can trade across different platforms.
JW : What have been the biggest obstacles to adoption?
JR : In the midst of the pandemic we didn’t have the level of interaction we wanted with some of the communities. That is something we are going to tackle head on as we move into the summer months, because there is still a human element of contact that we think is very important at the early-adoption stage.
The other part of the rollout has been exercising patience with the process. There is far greater [demand] for sand dollars than individuals who have access to them. That access is a function of the payment providers taking on interested customers. We have given the financial institutions the space to complete their product development and deal with all the interoperability issues. Now they can begin to grow and bring those interested customers on board.
For a large part of the population in the Bahamas, it’s not that they don’t have a mobile phone or a smartphone. In many cases it’s necessary for people to understand the security—that a digital transaction can be superior to cash in terms of the audit trail and your ability to recover payments if there is fraud or loss of some kind. Education is very important, in many respects even more so than giving people access to the devices.
JR : The Bahamas and the Eastern Caribbean were almost even-paced in our processes. We decided we would also share experiences and learn from each other. There are several other countries in the Caribbean that are going the route of CBDCs. I think part of the excitement for the region is the possibility of exploring technical cooperation that will eventually lead to regional payment platforms. There are some constraints, because it depends on the level of interregional trade, and typically we trade a lot in U.S. dollars. But once you move beyond that, there is some room for an interregional mechanism.
JW : What’s the future of the sand dollar? What will it look like in 10 years?
JR : What we want is—for anyone who today is making a payment by writing a check or having to withdraw cash—that they can accomplish the same through this new payment channel.
One of the limitations of being an island archipelago is that even if you have a bank, depending on where you live, you probably have to take a trip to Nassau and go to the bank. Some people do that, as ridiculous as it sounds. If you live in some of the remote communities, it’s a half-day or a full-day event to get to the bank.
JW : Is there an element of national pride in beating the world’s biggest economies in rolling out a CBDC?
JR : It’s nice to be called the first, but there is already so much work being done that you are in many cases adopting the technology and taking on the knowledge that has been built up.
For us, it’s given us an opportunity to leapfrog, because until 2017-18 we did not yet have the legal framework for nonbanks to provide payment services. We provided the sand dollar at the identical time that we were admitting new players into the space to provide mobile payment services. The infrastructure almost came with the [CBDC] feature enabled. We didn’t have to go into existing infrastructure and try to connect it. And that’s what made it so much easier to “appear” that we were so far ahead of the rest.
In the United States, there’s talk of accelerating the settlement process in the payment space. In many parts of Africa, the concern is connecting all the platforms together. It will take longer for them than it did for us, because we started from the ground up.
Wyss covers the Caribbean for Bloomberg News in San Juan, Puerto Rico.
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