Digital currency ‘Sand Dollar’ of the Bahamas is slowly gaining attention from central bankers

The Caribbean island of The Bahamas has something up its sleeve that has likely made central banks from all over the world turn their heads and observe how it will go.

Via a mobile application, Sand Dollar is a digital currency issued by the Central Bank of The Bahamas last October for use across the country. The food items in restaurants were among the first to be bought using it.

“It’s instant – I get a message, and it’s received,” told Dawn Sands, owner of NRG, the cafe in the capital Nassau, as she showed Reuters via video how sales work. She believes that once people get familiar and educated, that the mode of payment is going to be popular.

This new currency aims is to boost financial services to people in the archipelago of 700 islands, which is a challenge in terms of securely distributing cash. Payments are also a key area.

This experiment in the archipelago nation of around 390,000 people is modest in itself, yet it is now closely watched by major central banks across the world, from the U.S. Federal Reserve and European Central Bank to the People’s Bank of China and Bank of England.

From onboarding users to helping businesses avoid expensive payments fees, The Bahamas’ Sand Dollar offers clues for other economies plans in introducing central bank digital currencies (CBDCs) and its practices. This comes as international banks now find themselves in a position where the use of physical cash is at a decline. They have also been looking at issuing their own versions of digital coins.

“Everybody is interested in it – I think it’s arguably the first step,” said Philip Middleton, deputy chairman of the OMFIF central banking think-tank in London.

The big banks are wary of blockchain-based technology like Bitcoin that are made to banish central banks, though are also hesitant to miss the boat on potential game-changers and yield Big Tech offerings like the Facebook-backed Diem, formerly known as Libra.

Meanwhile, other small nations such as Cambodia have also proceeded with their own developments in digital currencies, which promise to extend financial services to people who currently lack access to traditional banking, particularly in the developing world.