The Solomon Islands has signaled its intention to start exploring a central bank digital currency (CBDC) via the launch of a proof-of-concept (PoC) to test the waters.
The Central Bank of Solomon Islands (CBSI) will partner with Soramitsu to explore technical standards and functionalities for its experimental CBDC system, per a press release.
Called Bokolo Cash—after Bokolo, a native currency made from shells—the CBSI says the CBDC will be accepted as legal tender within the purview of the PoC. Participants of the PoC will be able to pay and accept Bokolo Cash for goods and services, with each Bokolo Cash at par with the Solomon Islands dollar.
Available sources show that the Solomon Islands’ PoC is exploring the concept of a wholesale CBDC to support interbank transactions using blockchain technology. Participants will undergo extensive Know Your Customer (KYC) verification in line with local and international best practices.
The Solomon Islands Prime Minister Manasseh Sogavare hailed the CBSI’s decision to begin CBDC exploration as a step in the right direction designed to improve financial inclusivity in the country.
“CBDC will improve safety, credibility, and privacy, provide financial services that leave no one behind, and bring sustainable economic development and technological development to the Solomon Islands, enabling a new era,” said Sogavare.
Although still in the preliminary stages, the PoC hinted at plans to explore cross-border payment functionality through a blockchain. CBSI and Soramitsu are eyeing interoperability and global reach as key metrics in choosing a potential ledger to be the underlying architecture for their cross-border ambitions.
Soramitsu will also attempt to use the PoC to test its SORA network resilience in cross-border payments, allowing the bridging of Bokolo Cash through QR codes. The firm says that since no country owns SORA, the possibilities of political exposure have been reduced to the barest minimum, encouraging central banks to bridge their CBDCs to the network.
Island nations are joining the CBDC train
The Solomon Islands’ decision to launch CBDC exploration sees it join other island nations experimenting with CBDCs. At the moment, the island nations of Palau, the Marshall Islands, and Mauritius are riding the CBDC train as a tool to improve financial inclusivity and the state of cross-border payments.
Meanwhile, Tonga is fiddling with the idea of allowing BTC to become legal tender. At the same time, Eastern Caribbean island nations have rolled DCash to operate as a bilateral CBDC system. While Jamaica’s attempt at a CBDC has received mixed results, the central bank has introduced multiple initiatives to trigger greater merchant adoption.
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.
Watch: Finding ways to use CBDC outside of digital currencies
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