The Bahamas, an island nation in the West Indies, wrote the history of the digital currency on October 20 with the official launch of a new central bank digital currency, the so-called sand dollar. The first country to launch CBDC has become available to all residents, and while the Bahamas is a small country of only 393,000 people, the event appears to be of global economic significance.

Or is that? “Maybe if it worked,” Ross Buckley, professor of disruptive innovation at KPMG-KWM at the University of New South Wales in Sydney, told Cointelegraph. “Other small island states – for example, in my Pacific Garden – are watching this closely and may follow suit.”

James Barth, Professor of Finance at Auburn University, put the event in the context of a series of CBDC milestones that began with the launch of Bitcoin (BTC) in 2009 and included the Facebook Libra announcement in 2019, and CBDC research in April. And a statement from the European Central Bank on the possible digital euro issue in October. “This development and the COVID-19 pandemic has made it almost certain that the country – perhaps a small country – will live with the digital currency of the central bank,” he said.

However, some said it was too early to speak about it. “First we have to see if this works well in practice,” Hans Gersbach, professor of economics at the Swiss Institute of Technology in Zurich, Switzerland, told Cointelegraph. Jay Go, CEO of Nzia Limited, a company that provides technology solutions for Bahamas deployment, told Cointelegraph that the Sand Dollar was introduced in the Bahamas to boost economic integration across the country.

“The Bahamas is a vast archipelago that extends over more than 100,000 square kilometers of sea, with many islands and remote settlements where their residents do not have access to formal financial services.”
Due to population shortage, it is not economically viable for banks to establish branches and maintain infrastructure. Joe told Cointelegraph that the new commercial central bank “provides the Bahamas with comprehensive access to digital payments and expands access to financial services across the country.” Among the key questions that the country’s central bank and other stakeholders wanted answered in the implementation, Joe said, “How will the current rules and policies be shaped, and ultimately how people will perceive the central bank of the central bank until it is someday ubiquitous like cash … ”

sense of urgency?
The global demand for e-services has risen dramatically with the spread of the COVID-19 pandemic, and this undoubtedly is driving the development of CBDC around the world. As stated recently by Deputy Governor of the Canadian Central Bank Timothy Lynn. “If we want to be ready to develop some kind of digital central bank product, we need to move faster than we thought.” Bart further explained:

The virus has changed behavior in favor of more social distancing and thus wider use of online communications and transactions locally and globally. This definitely makes digital currencies more relevant to money and payments. ”
But US Federal Reserve Chairman Jerome Powell said at an October 19 event at the International Monetary Fund that this sense of urgency is not universal. He believes that digital central bank currencies face many critical challenges, such as preventing fraud and cyberattacks, financial stability and protecting privacy, and says: “There is still a lot more to be done. […] In fact, I really think the CBD is One of those issues is where it is more important for the United States to do it right than to be the first. ”

Powell said that the United States does not need to worry about losing the leading edge over the digital currency. He was right? According to Buckley, “Maybe literally, yes,” who added: “In the long term, but if China or any other country allows digital currencies to be used in international trade, the United States must respond quickly.

The United States is benefiting greatly from the formation of a global reserve currency, and losing exclusivity in this regard could be costly to the US economy. It would also have political ramifications – for example, the removal of many countries from US economic sanctions. Buckley believes that the “China long game” will undoubtedly lead to an increase in the US dollar as the world’s reserve currency. “He (China) hates that the global economic system is based on the US dollar and seeks to create a parallel system that controls it,” he said, adding, “It has been the driving force behind naming trade agreements for others. The country’s exporters and importers with China are denominated in yuan.”

Source: CoinTelegraph