Bahamians didn't want CBDCs — So now they're being forced to use them

Nicholas Anthony4 hours agoBahamians didn"t want CBDCs — So now they"re being forced to use themRegulators in the Bahamas are sick of their citizens" reluctance to adopt a CBDC, so they"re forcing commercial banks to get on board.371 Total views1 Total sharesListen to article 0:00OpinionOwn this piece of crypto historyCollect this article as NFTJoin us on social networksThe Bahamian government will soon start forcing commercial banks to distribute its central bank digital currency (CBDC). Known locally as the Sand Dollar, the CBDC accounts for less than 0.41 percent of the currency in circulation and the Central Bank of The Bahamas reported that the CBDC has been used less and less as time goes on. Facing similar circumstances, any private business would likely be preparing to go out of business. The central bank, however, seems to have other plans in mind.

After aninterview with Central Bank of the Bahamas Governor John Rolle, Reuters reporters Elizabeth Howcroft and Marc Jones described Rolle’s stance, writing, “With [CBDC] take-up still limited, carrot was turning into stick and commercial banks were now being told of regulations that will effectively force them to distribute [the CBDC].”

In other words, the central bank rolled out a CBDC, but people were not interested. In an early attempt to spur adoption, the central bank offered a "carrot" in the form of rebates given in return for topping up CBDC wallets and spending the CBDC in stores. Yet, it still was not enough to spur mass adoption. Therefore, the government is setting the carrots aside and pulling out the stick of regulation to force banks to distribute the CBDC.

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We have seen this type of behavior before. 

In Nigeria, the central bank was facing abysmal CBDC adoption of just 0.5 percent. In an initial bid to sweeten the deal and encourage adoption, the central bank announced that there would be discounts on cab fare. When that didn’t work, it was announced that cash would be pulled from the streets so that new notes could be issued. Any remaining notes that failed to be exchanged would expire in just two months.Bahamas CBDC tracker. Source: The Human Rights Foundation

The scheme resulted in a cash shortage that led to protests and riots in the street, but it was ultimately celebrated by the Central Bank of Nigeria when CBDC adoption rose from 0.5 to 6 percent after people had nowhere else to turn.

Although the Central Bank of The Bahamas is taking a less drastic approach than the Central Bank of Nigeria, it still showcases a fundamental difference between endeavors in the public and private sectors.

In the private sector, someone might open a shop only to learn their services are not right for the market they are in. For instance, a snowboarding shop is unlikely to do well in the middle of The Bahamas. With no customers coming in the door, the shop will either close down or pursue a new business model. However, pursuing a new business model will also require convincing investors to volunteer funds to support the new venture. Failure to make a compelling case will mean the end of the business.

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The experience in the public sector is a different story. Government projects are not so quick to shut down. First, unlike in the private sector, no one is volunteering the funds to support the project. The profit model that guides resources in the private sector to where they are most valued is instead replaced with the values of government officials.

Second, the government has an unmatched ability to resort to force. The Nigerian government forced cash off the streets and now the Bahamian government is planning to force banks to distribute the CBDC. No business has this sort of power.

No business is forcing people to use Bitcoin (BTC), Ether (ETH), or any other cryptocurrency. Even Ripple — a company working with several central banks to develop CBDCs — is not able to force people to use its own cryptocurrency, XRP (XRP). Yet, despite CBDCs being around for only a few years, there are now two clear examples of two vastly different governments resorting to some form of force.

As a general rule, central bankers (and all government officials) would be wise to remember that if something has to be forced, it’s probably not a good idea in the first place. CBDCs are no exception to this rule.Nicholas Anthony is a guest columnist for Cointelegraph and a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives. He is the author ofThe Infrastructure Investment and Jobs Act’s Attack on Crypto: Questioning the Rationale for the Cryptocurrency Provisions and The Right to Financial Privacy: Crafting a Better Framework for Financial Privacy in the Digital Age.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.# Law# Government# Caribbean# Freedom# Liberty# globe# CBDC# Opinion# RegulationAdd reaction