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The Bahamas launches world’s first CBDC, the ‘Sand Dollar’

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The Central Bank of the Bahamas has announced the country’s “Sand Dollar” — a state-backed virtual currency — is now available nationwide.

According to an Oct. 20 Facebook post from Project Sand Dollar, the central bank digital currency (CBDC) became available to all 393,000 residents of The Bahamas from roughly 10:00 PM UTC. This makes The Bahamas the first country in the world to officially roll out a CBDC.

China is currently testing a pilot program for its digital yuan with a $1.5 million giveaway, and Cambodia’s “Bakong” digital currency is expected to become operational in the coming months following its pilot launch in July 2019.

Sand Dollar transfers are made by mobile phone, with roughly 90% of the Bahamian population using mobile phones as of 2017.

According to the Sand Dollar website, residents of The Bahamas can use the digital currency at any merchant “with a Central Bank approved e-Wallet on their mobile device” and transaction fees are “negligible.” The central bank selected transaction provider NZIA as its technology solutions provider for the rollout of the digital currency.

The central bank of the Bahamas has been preparing for the launch of the CBDC for a few years. In 2019, it started a pilot program using 48,000 digital Sand Dollars on the islands of Exuma and Abaco, which have a combined population of fewer than 25,000 people. Each Sand Dollar is pegged to the Bahamian dollar, which is in turn pegged to the U.S. dollar.

The Sand Dollar is intended to drive greater financial inclusion within the archipelago nation of more than 700 islands, about 30 of which are inhabited. Cointelegraph reported in September that Chaozhen Chen, the assistant manager of eSolutions at the Central Bank of The Bahamas, said the CBDC would help provide “access to digital payment infrastructure or banking infrastructure” for underbanked and unbanked residents.



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.