Report: FTX Collapse Slows Bahamas’ CBDC Project

The Bahamas’ two-year-old digital currency project has gotten off to a slow start.

The reasons are twofold, according to a Saturday (Jan. 14) Bloomberg News report: COVID-19, and FTX.

Kimwood Mott, the project manager for digital currency implementation at the Central Bank of the Bahamas, blames the slow start of the country’s Sand Dollar on the pandemic. It limited the government’s efforts to explain the facts about central bank digital currencies (CBDCs).

“I am always telling people that this is not a cryptocurrency,” Mott told Bloomberg. “But if people don’t know what a cryptocurrency or a CBDC is, then I’m just making a statement.”

Mott also cited the problem of the “FTX effect.” While most people in the Bahamas weren’t invested in the bankrupt crypto exchange — which moved its headquarters to the island nation last year — the hurricane of bad news following its collapse has made people suspicious of digital currencies, Mott said.

The Bahamas introduced the Sand Dollar in late 2020 as a way to assist the nation’s unbanked population. The Bloomberg report touched on efforts to expand the use of CBDCs in the country, such as Island Pay’s launch of a Sand Dollar digital wallet aimed at the 6 million tourists who visit the country annually.

The report also included comments from Kendric Dames, a barber in Nassau and Sand Dollar proponent, who likes using the CDBC because there are no fees associated and none of the worries about carrying cash. His customers, however, are a different story.

“A lot of people still think it’s a crypto, and that’s holding them back,” Dames said. “Everyone who gets in this chair, I try to educate them.”

CBDCs are electronic, rather than physical, forms of money backed and issued by a sovereign nation. Compared to cryptocurrency tokens, which are stored-value digital assets, CBDCs function as true legal tender.

As PYMNTS noted in December, last year saw CBDCs rise in popularity as cryptocurrencies crashed. The value of the crypto market fell to $1.4 trillion from its 2021 high of $3 trillion, while governments around the globe upped their experiments with national legal tender.

“Perhaps fearing that the future of money might pass them by, the central banks of 114 countries have this past year been undertaking a variety of investigative programs researching, and even acting out, the feasibility of issuing sovereign, virtual currencies backed by a federal banking system,” PYMNTS wrote.

As of December 2022, all G7 economies have moved into the development stage of a CBDC.