A Survey of Central Bank Digital Currencies (CBDCs) in the Caribbean Michael DaCosta 1 June 2023 1. Introduction A central bank digital currency (CBDC) is a digital version of cash issued by a central
bank that can be used to make electronic payments. It is legal tender, and complements
physical cash through its advantages of security, speed, low cost, and convenience.
CBDCs differ from other private forms of digital payments because they are guaranteed by the central bank. A well-functioning CBDC meets a clearly identified demand and
operates on a secure and resilient digital payments platform. Also, it is supported by the key financial institutions and other payment service providers (PSPs) and enjoys broad
support from the public, business, and government. 2
A central bank may consider issuing digital currency in response to various factors.
These include the ongoing shift away from central bank issued physical cash (public
money) to digital payments on private sector platforms (private money). While this shift has been accompanied by innovations benefitting users, it also carries risks related to
the financial soundness of banks and other PSPs, technology failures, and the exposure of platforms to security threats. Moreover, as payments become increasingly digitized central banks may wish to maintain an appropriate balance of public and private
moneys to preserve their role as an anchor for the payments system and to maintain stability. 3
The world’s first CBDC (the Avant) was issued by the Bank of Finland in 1992. It was
issued in the form of a smartcard and used for small transactions. However, the Avant ceased to be a CBDC in 1995 when its operations were sold to a group of commercial
banks (Box 1). In recent years, Caribbean countries have been among the first to issue CBDCs. The Bahamas launched its SandDollar in October 2020, becoming the first
nationwide CBDC in the world (Atlantic Council, 2023). This was followed in 2021 by D-
Cash, issued by the Eastern Caribbean Central Bank (ECCB) for the member countries of 1 The author is grateful for comments on an earlier version of the paper from Lynsey Ward and Yvonne Cooper of the
Central Bank of The Bahamas, Keith Dublin, and Sherwyn Williams. This paper discusses only retail CBDCs, which are held and used in payments transactions by individuals and businesses. Wholesale CBDCs are those used in transactions among central banks and other financial institutions.
2 3
Bank of England and HM Treasury, 2023.