The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank’s digital currency will be made available nationwide by the 2020 third quarter’s close, the deputy prime minister said yesterday.

Unveiling reforms to the financial services regulatory regime in the House of Assembly, K Peter Turnquest said the Central Bank of The Bahamas Bill 2020 will usher in further modernisation of the country’s domestic payments system.

“The Central Bank Bill provides a framework for both the issuance and regulation of a Bahamian Central Bank digital currency,” Mr Turnquest added. “The Sand Dollar, as the instrument has been called in the pilot phase underway, will provide for an interoperable digital payments infrastructure.

“It will permit all supervised domestic institutions to provide digital financial services on a nationally integrated platform. In so doing, it would promote accelerated outcomes for inclusion and access to financial services, and would offer a platform for domestic FinTech (financial technology) innovations.

“With intensive work underway on the technology infrastructure, and attention to key matters of regulations now in sharp focus, the Central Bank is preparing to make the Sand Dollar available on a national basis by the end of the third quarter this year.”

The Bahamian digital dollar is currently being trialled on both Exuma and Abaco ahead of its planned national roll-out. The testing phase is understood to have been somewhat delayed by the COVID-19 pandemic and associated lockdown, but the initiative is seen as key to improving financial inclusion and transaction certainty.

“The Central Bank of The Bahamas Bill further opens up participation in domestic payments and settlements to non-banks such as credit unions, MTBs (money transmission businesses) and payment services firms,” Mr Turnquest added.

“These will all be permitted to maintain settlement accounts at the Central Bank and be equipped to direct their own payments through the ACH (Automatic Clearing house) and RTGS (Real Time Gross Settlement System).”

Mr Turnquest added that the Central Bank of The Bahamas Bill also included reforms that seek to improve governance arrangements between the government and the regulator.

These involve “more stringent provisions” on the Central Bank’s short-term lending to the government and public sector - a sharp contrast to the present regime, where “no comprehensive balance sheet limits currently exists”.

Mr Turnquest said: “Short-term advances and other forms of credit would be capped at 30 percent of the estimated revenues of the government, and always subject to market interest rates.

“To be clear, this constrains the bank’s capacity to lend to amounts that are significantly below the peak exposures of the mid-point of the last decade, while leaving just modest headroom for bridge financing in the current economic environment.

“By extension, it maintains the weight of the domestic debt management strategy on borrowing from non-Central Bank resources.”

The Central Bank of The Bahamas Bill will also provide a governance framework for the management of the dormant account funds, which are the inactive deposits placed under the regulator’s control.

This will oversee how the funds are to be invested, and the provisions for the return of dormant funds subsequently claimed by their beneficial owner or transferred to the treasurer.

Turning to the Protection of Depositors (Amendment) Bill, Mr Turnquest said this widens membership in the Deposit Insurance Corporation (DIC) to include credit unions so that their depositors are protected up to a maximum of $50,000.

He added: “To optimise flexibility around adequacy of funding for the scheme, the DIC would be authorised to vary the premium rate for coverage based on prescribed criteria including a member financial institution’s risk profile, and to borrow from the government to satisfy claims obligations.”

“With regard to the safety and soundness of member institutions, the DIC would also be empowered to delegate rights to the Central Bank to undertake supervisory examinations, specifically, on the former’s behalf.”