Bahamas is the first country to launch a central bank digital currency (CBDC). The milestone digital currency is the sand dollar. It is a breakthrough after a long period of research and tests.
The coin is a digital equal to the Bahamian dollar. The central bank releases and controls the coin. The coin released through a tweet is likely to be one of the safest ways to transact in the country.
The new digital coin is less costly to transact with compared to the existing options. It is also instrumental in financial inclusion and aids in transaction efficiency.
The Journey to the Bahamas Milestone Digital Currency
A decade ago, the fiat currency was the undisputed model of exchange. Even though other assets like gold exist, they are reserves. They are also valued against the fiat. The government, through the central banks, had all the control over the economy.
This was only to stay until post the 2008 financial crisis. Satoshi Nakamoto released Bitcoin to become an alternative value of the exchange. The coin performed well, with other digital currencies coming up. Ethereum, Ripple, and thousands of more cryptocurrencies have come up.
Even though viable, cryptos are too volatile. This brought about stablecoins. They offer access to virtual currencies without volatility concerns. They are also decentralized hence a threat to the government. Most governments have since banned the stablecoins.
They, though, understand cryptos are inevitable. They are hoping the milestone digital currency will replace cryptocurrency. The best bet now is the central bank digital currencies.
The Bahamas has been the leading country in looking for digital currency. It wanted a coin to support the developing digital payment system.
The country started a pilot project in 2019. Through the year, it went on a drive to test the viability of the coin. The period involved different merchants using the currency in the initial stages. They also investigating the possible glitches and how to solve them.
The pilot project also allowed for the strengthening of the traditional sector. The online digital world is susceptible to hacking and other cyber attacks. For that, the country had to put in place the security systems. It’s only after this that the government has released the milestone digital currency. It has now integrated the coins into its financial system.
How Sand Dollar Works
Most people are yet to understand how the central bank digital currency works. It operates like a fiat currency.
The only difference is that it exists online. It’s more like the digital version of the national currency.
Sand coins value matches that of the Bahamian dollar at ratio 1:1. The Bahamian dollar is also connected to USD at the rate of 1:1. It means the Sand dollar value will always be the same as that of the US dollar. Some quarters believe it’s a way to release a digital USD by proxy.
The Sand dollar project has a vibrant ecosystem to support digital payments. It works with a range of Authorized Financial Instruments (AFI).
The AFI handles all retail financial services. They provide both the wallet and custodial services.
The AFIs include money transmitter businesses and payment processing service providers. Commercial banks are also part of the ecosystem.
The central bank provides a Sand dollar app for all the service providers. It also allows for custom apps from businesses. These, however, must undergo intense securitization before they can become usable.
The customers can then access three-tier wallet provisions for the coin. This is like the Chinese milestone digital currency plan. The lowest comes with lower regulation requirements. It yet comes with less coin access. The other higher two allows for more money access with extra needs.
The sand dollar is big on security. The wallets provide for multi-factor authentication processes. They also offer regular passwords and a One Time Password (OTP) in a wallet swap.
The sand dollar does not gain any interest and is only held domestically. It supports a wide range of domestic retail use. It is also active for use 24/7/365 in all Bahamas jurisdictions.
The coin also comes with novel connectivity through the NZIA Cortez blockchain technology. This allows for mobile device connectivity. The Bahamas also experiences power outage during hurricanes. The hybrid wireless network ensures it does not lose connection.
What does the Bahamas Milestone Digital Currency mean to the crypto world?
The introduction of the Bahamas milestone digital currency is a significant crypto achievement. Government involvement has always been a threat to cryptocurrencies’ existence.
Most governments felt threatened by cryptos decentralization. It appears they were losing power to the new currencies. The commercial banks also felt helpless as the cryptos looked to replace them.
Most governments worry about how to handle virtual currencies. Most of the governments preferred to ban them. They, however, realized banning would not stop the cryptocurrencies. Traders would still access them by using VPNs and other masking software.
The CBDCs bring them back into the fold. The government retains all the powers it had over the economy. Moreover, it still protects investors and consumers from crypto concerns. The central bank can track supply and control inflation as before.
The success of the Bahamian milestone digital currency will be more far-reaching. Most countries have been considering launching the central bank cryptos. They now have a benchmark through the Bahamas to use. The Sand works as the measure on security and deployment of the central bank currencies.
Countries like China, the USA, and the European Union are looking towards the CBDCs. They are all at varying stages of deploying the coins. China is even considering banning other cryptocurrencies. They can all do with a projection from the Bahamas digital currency.
The world, at last, has its first central bank digital currency. This is all thanks to the Bahamas milestone digital currency. The Sand dollar is a start to a new financial trend. Soon enough, several other countries will follow with a coin of their own.