The International Monetary Fund (IMF) has made several recommendations for how the Bahamas economy can continue to recover from challenges. And one of these recommendations is that the Caribbean country deepens its central bank digital currency (CBDC) adoption.
The recommendation was made during a recent consultation of the executive board of the IMF with the country’s officials. In a press release, the IMF revealed that its directors consider the Bahamas’ CBDC—the Sand dollar, which is also one of the first CBDCs to launch—to hold a lot of potential for improving financial inclusion.
However, the CBDC currently makes up only about 0.1% of the country’s money supply. Based on this, the IMF recommended that the Bahamas accelerate its CBDC education campaign and also expand the currency’s capacity. The release read:
“Directors recognized the potential of the Sand Dollar to foster financial inclusion and recommended that the central bank accelerate its education campaigns and continue strengthening internal capacity and oversight.”
IMF stance on digital currencies remains unchanged
The IMF also took the chance to warn the country about the dangers of the digital currency market. It highlighted that it is crucial for the Bahamas to provide a “robust supervisory and regulatory framework for the growing virtual assets sector.”
This will help the country to put in place AML/CFT frameworks to recognize early warning signs of foul play in the digital currency market and build resilience for the financial market, the IMF said.
The body has long considered digital currencies a threat to the global economy. In a similar consultation with El Salvador earlier this year, the IMF implored the country to remove Bitcoin from its legal tender status.
In negotiations with Argentina to provide a bailout for the country, the IMF included a condition requiring Argentina to discourage the use of digital currencies to receive the funds.
More recently, the body also warned that the adoption of Bitcoin as legal tender by the Central African Republic was concerning. It warned that the experiment was doomed to fail and would drag down the country’s already struggling economy with it.
According to Kristalina Georgieva, a managing director of the international bank, countries have a better chance of stability by adopting CBDCs. Georgieva told CNBC that private digital currencies do not stand a chance against well-designed CBDCs.
“If CBDCs are designed prudently, they can potentially offer more resilience, more safety, greater availability, and lower costs than private forms of digital money,” she stated.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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