The Bahamas holds a distinctive place in the global development of central bank digital currencies (“CBDC”). On October 20, 2020, it became the first country in the world to launch a CBDC on a nationwide basis. The Sand Dollar is a digital representation of the Bahamian dollar issued by the Central Bank of The Bahamas (the “Central Bank”), that functions as legal tender within the country’s existing financial regulatory framework.
Background
The Sand Dollar is a centralized, regulated, stable, and secure means of exchange issued by the Central Bank and made available to the public through authorized financial institutions (“AFI”). It constitutes a direct liability of the Central Bank and is backed by The Bahamas’ foreign reserves. Pegged one-to-one to the Bahamian dollar, which is itself pegged one-to-one to the U.S. dollar, it is a domestic-use-only alternative to cash that can be used through a digital wallet, accessible on a smartphone or, alternatively, a payment card.
The Sand Dollar was initially developed as part of the Bahamian Payment Systems Modernization Initiative, a reform effort dating back to the early 2000s, which sought to broaden financial inclusion and improve the efficiency of the domestic payments system. The Central Bank first piloted the Sand Dollar in the Exuma Islands in December 2019, using the archipelagic setting as a practical test case for implementing a single digital currency across multiple islands and cays. The pilot was later extended to Abaco in early 2020, following Hurricane Dorian, which significantly disrupted the island’s financial services sector. During this period, the Sand Dollar allowed the Central Bank to assess whether digital currency infrastructure could support access to financial services during major institutional disruptions, particularly in the aftermath of natural disasters.
Following the success of the pilot program, the nationwide rollout occurred several months later, and the focus shifted to its practical use in the Bahamian economy.
Using the Sand Dollar
The Sand Dollar differs fundamentally from traditional cryptocurrencies. Where crypto assets operate as digital instruments without sovereign backing, the Sand Dollar is a fully recognized legal tender whose value and stability are guaranteed. Sand Dollars are accessible through digital wallets provided by AFI’s. According to the Central Bank’s step-by-step guide, users can choose their preferred Sand Dollar-enabled AFI, determine which Tier best suits their needs, complete the onboarding process, and download the AFI’s digital wallet to access the currency. The tiered structure is central to how the framework balances inclusion against risk.
Basic (Tier One) personal wallets have a $500 holding limit and a $1,500 monthly transaction limit. This tier is available to the general public, including non-residents and visitors, and does not require government-issued identification for enrolment. It is, however, unable to be connected to a local bank account. Premium (Tier Two) personal wallets can be linked to a local bank account and have an $8,000 holding limit and a $10,000 monthly transaction limit, but do require government-issued identification for enrolment. The Sand Dollar is also available to businesses for commercial use with a wallet holding limit of $8,000-$1,000,000, subject to the company’s capacity, needs and its ability to meet the Central Bank’s regulatory requirements.
The Legal and Regulatory Framework
The Central Bank of the Bahamas Act, 2020 (the “Act”) provides the institutional basis for the Central Bank’s role in currency issuance, monetary stability, and supervision of payment systems, while the Bahamian Dollar Digital Currency Regulations, 2021 (“BDDC Regulations”) establish the regulatory structure for the issuance, maintenance, and use of digital legal tender. The Act is the foundation of the framework and is complemented by other regulatory legislation, like the Banks and Trust Companies Regulation Act, 2020. The BDDC Regulations define digital currency as “an electronic version of the Bahamian Dollar issued by the Central Bank” rather than a separate digital instrument. Holdings of the Sand Dollar do not yield interest, and the Central Bak does not charge a fee to wallet holders. This reflects a deliberate choice by the Central Bank to minimize competition with commercial bank deposits while providing an alternative, secure digital means of holding Bahamian dollars.
Consistent with this objective, the relevant Acts and Regulations position the Sand Dollar within a formal legal structure designed to evolve alongside the payment system. The framework allocates regulatory responsibilities to the Central Bank, along with authorized financial institutions, and approved payment service providers, embedding CBDC use within a controlled and supervised financial ecosystem. By maintaining oversight of licensing, customer due diligence, anti-money laundering, and counter-terrorist financing compliance, the Central Bank prioritizes regulated institutional participation that aligns with technological developments and its operational capacity.
While it is still in its wider implementation phase, the Sand Dollar has proven to be an asset in the Bahamian digital currency space. By providing individuals and businesses with secure alternative means of payment and holding currency, the Sand Dollar has been effectively fulfilling its initial purpose of increasing financial inclusion, payment system efficiency, and usability across the Bahamian islands and cays. Our local framework demonstrates the feasibility of a central bank digital currency and affirms that with the appropriate statutory support, governing body, and regulatory oversight, it is possible to provide the public with a secure and reliable digital alternative to physical currency.
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