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Lessons from the first implemented CBDC: the Sand dollar

In recent years, the debate about the design of the monetary system has become increasingly prevalent. A major topic within this debate is central bank digital currency or CBDC for short. A survey by the Bank of International Settlements (BIS) shows that in 2022, nine in ten central banks (CB) explored a digital variant of their own currency (Kosse & Mattei, 2022). In the euro area, the European Central Bank (ECB) is conducting a wide-range study of the pros and cons of a CBDC, in the form of a digital euro. Other CBs are at different stages of the research cycle. The Chinese central bank is experimenting extensively with its e-CNY and has been conducting research since 2014 (Luo, 2022; Prasad, 2021). The Swedish Riksbank published its first report on the possible designs and effects of the e-krona in September 2017 (Sveriges Riksbank, 2017). Against all these various studies and experiments is the Bahamian Sand dollar, the world's first, by 2020, fully implemented CBDC. The Bahamas is not the only country; in 2022, Jamaica fully introduced the JAM-DEX (CBDC Tracker, 2023). Since CBDCs are a relatively new phenomenon, there is logically little empirical data to support the potential advantages and disadvantages. The fully implemented Sand dollar can confirm or refute some of the claimed theoretical advantages and disadvantages, and lessons can be distilled from this case for the introduction of other CBDCs. This paper first discusses the (theoretical) motivations for implementing the Sand dollar, then discusses its operation and current low adaptation rates. Finally, it derives lessons that can be used in other CBDC cases.

Stairway to digital heaven

De digitale revolutie voltrekt zich in hoog tempo. Naar verwachting zullen er in 2020 meer dan 20 miljard laptops, mobiele telefoons en tablets met elkaar verbonden zijn tot een gigantisch wereldwijd netwerk. Spoedig zullen we voortdurend en overal verbonden zijn met internet. De virtuele ruimte die ontstaat uit de complexe interactie van mensen, technologie, software, en dienstverlening over het internet wordt steeds vaker cyberspace genoemd

Kostprijs precisiespuiten

In de huidige landbouwsector worden grote hoeveelheden gewasbeschermingsmiddelen gebruikt, wat leidt tot hoge kosten voor telers. De verwachte aanscherping van wetgeving dwingt de industrie om efficiëntere spuitmethoden te onderzoeken. Een veelbelovende oplossing is het implementeren van precisiespuiten, die niet alleen het gebruik van chemicaliën vermindert, maar ook kostenbesparingen oplevert en kan voldoen aan strengere milieuwetgeving. De technologie achter precisiespuiten maakt gebruik van real-time data, verzameld door camera's op de spuit, of van taakkaarten waarvoor van tevoren het land is in gescand. Beide mogelijkheden hebben verschillende kosten en besparingen. Hoewel er momenteel onvoldoende concrete data beschikbaar is om definitieve conclusies te trekken, wordt verwacht dat met een toename van het aantal precisiespuiten op het land betrouwbaardere resultaten kunnen worden verkregen. Op de lange termijn lijkt de aanschaf van een real-time precisiespuit aantrekkelijk, vooral voor grotere telers. De ontwikkeling die gepaard gaan met het verzamelen van meer data zal ook een beter inzicht geven in de effecten van precisiespuiten op de gewaskwaliteit, wat van belang is voor het berekenen van de effecten op de kosten.

Innovatie in de digital age....

1e alinea column: Hoe ziet innovatie in de digital age eruit? Anders dan daarvoor? Is succes van innovatie in de digital age wel voorspelbaar? Bestaat er zoiets als een business logica voor innovatie? Voor echt nieuwe business is dat maar heel beperkt zo. Er zijn geen marktvoorbeelden waar je naar kunt kijken. Concurrenten of collega’s zijn je niet voorgegaan en hoe de klant zal reageren is ook al een verrassing.

A digital euro for the people

The recent bank collapses and bailouts highlight the fragility of the banking system and our bank deposits. The digital euro is an opportunity to reconfigure our monetary system to serve the interests of people and society, by making money safer and more inclusive. However, the European Central Bank’s (ECB) current proposal for a digital euro falls short of this potential. The current plan relies heavily on private financial intermediaries and envisions putting important limitations on the use of digital euros, thereby impacting its capacity to be a universally accessible public good and risking undermining the uptake of the digital euro. By heeding to the bank lobby and baking their interests into the design of the digital euro, the ECB is missing an opportunity to develop an appealing and public digital alternative to private bank deposits. The digital euro must be developed with the aim of benefiting people and society over private interests, and these considerations should guide its design. In the short term, the digital euro should: 1. Be universally accessible. People should be able to access digital euros through a diverse range of intermediaries, which include non-profit and public entities. Implementing a tiered identification system for account-based digital euros, and introducing a value-based option, would ensure the availability of digital euros to the most vulnerable segments of society. 2. Be free of cost for users. Any future legislative framework on the digital euro should include a list of basic services that should be provided for free to users, such as opening and managing an account and the provision of a payment instrument (e.g. a card). 3. Offer a high level of privacy and data protection. Cash, which is fully anonymous, should be used as the baseline when developing the digital euro. A value-based option should be introduced alongside an account-based one, and it should be designed to be fully anonymous. For the account-based option, a ‘privacy threshold’ can ensure that users’ data for small transactions is protected. 4. Have a clear European Central Bank branding. Clear branding will help to differentiate public digital euros from private bank deposits. 5. Bring resilience to the payment system. By providing an offline value-based option, and by ensuring that the digital euro’s legal and technical core infrastructure is public and works independently of any private system, we can offer an alternative to existing payment rails and increase resiliency in case of outages. The digital euro is also an opportunity to improve financial stability by transforming the banking system, and helping central banks to more effectively carry out their monetary policy. The design of the digital euro should be flexible enough to allow for the achievement of these longterm goals, and more research should be conducted to explore how different features could help achieve them. For instance, a digital euro without any holding limit could reduce moral hazard in the banking sector, and the adjustment of interest rates on digital euro deposits and direct monetary transfers could improve the transmission of monetary policy.