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Sun, Fun and Crypto – Bahamas’ Central Bank Set to Introduce a Digital Currency

Last Updated May 22, 2023 3:48 AM
Mark Emem
Last Updated May 22, 2023 3:48 AM

The Bahamas has joined a small list of countries that are planning to experiment with central bank digital currencies (CBCD).

The country’s Deputy Prime Minister who also doubles up as Minister of Finance, K. Peter Turnquest, announced  during the recently held ‘The Bahamas Blockchain and Cryptocurrency Conference’ that a pilot digital currency will be introduced by the Central Bank of The Bahamas.

With The Bahamas consisting of over 700 islands, islets and cays, Turnquest said that the digital currency would assist in banking the unbanked. This comes in the wake of many commercial banks in the archipelagic state downsizing and leaving communities without vital banking services.

A Necessity, not a Fad

With a central bank digital currency the need to travel long distances to access these services would be reduced thus making life more convenient in a country where transportation is problematic and expensive, per Turnquest. The Deputy Prime Minister of The Bahamas also pointed out that a digital currency would improve the ease of doing business in the country.

“Digitization of our government and financial services complements both our ease of doing business initiatives and our digital Bahamas framework,” said  Turnquest.

The island nation of Bahamas will see plenty of benefits with a digital currency.

In North America, The Bahamas is joined in exploring CBDCs by Canada. This follows the publication of a staff discussion paper  late last year by the Bank of Canada, the country’s central bank. The paper authored by Walter Engert and Ben Fung focused on the impact a digital currency issued by the BoC would have on financial stability, the banking system, and the monetary policy among other issues.

Declining Use of Cash a Leading Motivator

Other countries whose central banks are toying with the idea of CBDCs include Norway and Sweden. Last month Norges, the central bank of Norway, released a working paper  which discussed a central bank digital currency at length. According to the working paper, the aim of the digital currency would be to serve as a legal tender and supplement cash. Per Oystein Olsen, the governor of Norges Bank, part of the reason for considering a CBDC was because the use of cash was in decline.

Falling cash use also cited as the motivation for Sweden’s central bank, Riksbank, to issue a CBDC. Per the governor of Riksbank, Stefan Ingves, the CBDC which would be known as e-krona is 36 to 48 months away from being materialized.

Research has also been conducted by the Bank of England with a view to determining the risks and benefits that would come from a CBDC. Though not exhaustive BoE’s staff working paper drew the conclusion  that despite one of the fears of CBDCs being balance sheet contraction, such a digital currency would not have an adverse impact on total liquidity in the economy or even private credit.

Bahamas images from Shutterstock.