The Sand Dollar, a digital equivalent of the Bahamian dollar, is in a vulnerable situation inside the island nation as a result of the spectacular collapse of the cryptocurrency exchange FTX.
With a peak value of $32 billion, the Bahamas-based FTX was formerly the third-largest cryptocurrency exchange in the whole world. The island nation thus started to get unfavorable media coverage when the exchange declared bankruptcy in November of last year.
The Bahamas’ Securities Commission has come under scrutiny for its involvement in the FTX collapse and related legal procedures. Additionally, FTX attorneys said that when the agency first intended to oversee bankruptcy proceedings for FTX in the Bahamas, it colluded with Bankman-Fried to get “unauthorized access” to FTX networks in order to transfer digital assets into its control.
The Bahamas became linked with the crypto meltdown as a result of all this. Nevertheless, before hosting FTX and becoming entangled in the aftermath of its crisis, the country was recognised as a pioneer of digital fiat.
The Sand Dollar was the first CBDC in history when it was first released by the Central Bank of the Bahamas in October 2020. But the adoption of the CBDC hasn’t exactly taken off, and the most recent FTX crisis has just made things worse.
According to Kimwood Mott, project manager for the Central Bank of the Bahamas’ introduction of digital money, the CBDC’s slow start is due to the pandemic. He said that Covid-19 led to a protracted national shutdown that made it difficult for the administration to promote the CBDC. He added:
“I am always telling people that this is not a cryptocurrency. But if people don’t know what a cryptocurrency or a CBDC is, then I’m just making a statement.”
The Sand Dollar is viewed by its proponents as addressing a number of systemic aims, including encouraging financial inclusion, reducing fraud and money laundering, providing sovereign options for digital payments, and more. It can even save lives in the aftermath of a natural disaster by enabling the government to deliver prompt emergency help to far-flung people.
It must first become a typical payment method for people, though. And the Central Bank of the Bahamas is stepping up its educational initiatives in an effort to hasten this process.
There have been rumours that the central bank sponsored a wine and food event in October of last year where only Sand Dollars were accepted as payment, which resulted in a considerable rise in usage around the nation. It also works along with private digital wallet providers to target particular populations.
According to statistics from the American think tank Atlantic Council, ten nations, including China, Nigeria, Argentina, Austria, and more, have established CBDCs in addition to The Bahamas. Additionally, 105 nations—representing more than 95% of the global GDP—are looking at developing their own national digital currency.