Although the People’s Bank of China (PBoC) has repeatedly vowed to become the first nation to introduce a central bank digital currency (CBDC), a small Caribbean nation has pipped it to the post.

On Wednesday, the Commonwealth of the Bahamas launched “Sand Dollars”, its own blockchain-based CBDC.

Although the cryptographic representations of the Bahamian dollar will undergo a “gradual release”, all citizens will be able to establish an account and complete transactions from today.

The Bahamas achieved independence from Britain in 1973 and has become one of the wealthiest nations in the Americas, in GDP per capita terms, thanks to thriving tourism and offshore finance industries.

If the rise of Bitcoin in recent years increased public discussions regarding the digitalisation of fiat currency, the launch of the Facebook-led Libra Association in 2019 can be said to have acted as a catalyst in CBDC research and development.

Defensively moving to ward off the encroachment of the private sector over global methods of exchange, more and more central banks have stepped up work into the technology.   

In a report published at the start of the year, the Bank for International Settlements found that more than 80 per cent of the world’s central banks had begun research into CBDCs.

Few have progressed as far as The Bahamas, however. While a digital version of the yuan is imminent, the PBoC is still conducting some of its last trials within the city of Shenzhen.

Venezuela issued its own cryptocurrency in 2018, the petromoneda. However, as its name suggests the currency was backed by the nation’s oil and mineral reserves rather than representing the Venezuelan bolívar.

As the Bahamian dollar is pegged to the US dollar on a one-to-one basis, those advocating the introduction of a CBDC in the US will closely monitor the progress of Sand Dollars.

Speaking at an International Monetary Fund (IMF) event earlier this week, Federal Reserve chairman Jerome Powell recognised the need for the United States to “remain on the frontier of research and policy development” regarding CBDCs, but stated: “We do think it's more important to get it right than to be the first.”

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