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Retail Central Bank Digital Currencies (CBDC), Disintermediation and Financial Privacy: The Case of the Bahamian Sand Dollar
General Economics · Submitted 4 Apr 2022
abstract compiled · 2026-09-23 · no language-model review
The authors' main claim I conclude by suggesting that combating cryptocurrencies is a task that cannot be solved by a CBDC.
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The abstract, sentence by sentence
The fast-growing, market-driven demand for cryptocurrencies worries central banks, as their monetary policy could be completely undermined. Central bank digital currencies (CBDCs) could offer a solution, yet our understanding of their design and consequences is in its infancy. This non-technical paper examines how The Bahamas has designed the Sand Dollar, the first real-world instance of a retail CBDC. It contrasts the Sand Dollar with definition-based specifications. I then develop a scenario analysis to illustrate commercial bank risks. In this process, the central bank becomes a deposit monopolist, leading to high funding risks, disintermediation risks, and solvency risks for the com-mercial banking sector. I argue that restrictions and caps will be the new specifications of a regulatory framework for CBDCs if disintermediation in the banking sector is to be prevented. I identify the anonymity of CBDCs as a comparative disadvantage that will affect their adoption. These findings provide insight into governance problems facing central banks, and coherently lead to the design of the Sand Dollar. I conclude by suggesting that combating cryptocurrencies is a task that cannot be solved by a CBDC.
background contribution method result interpretation main claim
| # | sentence | role | the authors' own work | states the main conclusion | strength |
|---|---|---|---|---|---|
| s0 | The fast-growing, market-driven demand for cryptocurrencies worries central banks, as their monetary policy could be completely undermined. | background 1.00 | 0.05 | 0.02 | asserted 0.53 |
| s1 | Central bank digital currencies (CBDCs) could offer a solution, yet our understanding of their design and consequences is in its infancy. | gap 0.79 | 0.05 | 0.02 | hedged possibility 0.99 |
| s2 | This non-technical paper examines how The Bahamas has designed the Sand Dollar, the first real-world instance of a retail CBDC. | contribution 1.00 | 0.79 | 0.03 | asserted 0.99 |
| s3 | It contrasts the Sand Dollar with definition-based specifications. | contribution 0.52 | 0.77 | 0.02 | asserted 0.81 |
| s4 | I then develop a scenario analysis to illustrate commercial bank risks. | method 0.90 | 0.92 | 0.02 | asserted 0.88 |
| s5 | In this process, the central bank becomes a deposit monopolist, leading to high funding risks, disintermediation risks, and solvency risks for the com-mercial banking sector. | result 0.76 | 0.68 | 0.14 | asserted 1.00 |
| s6 | I argue that restrictions and caps will be the new specifications of a regulatory framework for CBDCs if disintermediation in the banking sector is to be prevented. | interpretation 0.69 | 0.78 | 0.47 | asserted 0.57 |
| s7 | I identify the anonymity of CBDCs as a comparative disadvantage that will affect their adoption. | result 0.85 | 0.81 | 0.06 | asserted 0.77 |
| s8 | These findings provide insight into governance problems facing central banks, and coherently lead to the design of the Sand Dollar. | interpretation 0.84 | 0.83 | 0.11 | asserted 0.94 |
| s9 | I conclude by suggesting that combating cryptocurrencies is a task that cannot be solved by a CBDC. | interpretation 0.56 | 0.70 | 0.42 | hedged possibility 0.58 |
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The paper
Original abstract
The fast-growing, market-driven demand for cryptocurrencies worries central banks, as their monetary policy could be completely undermined. Central bank digital currencies (CBDCs) could offer a solution, yet our understanding of their design and consequences is in its infancy. This non-technical paper examines how The Bahamas has designed the Sand Dollar, the first real-world instance of a retail CBDC. It contrasts the Sand Dollar with definition-based specifications. I then develop a scenario analysis to illustrate commercial bank risks. In this process, the central bank becomes a deposit monopolist, leading to high funding risks, disintermediation risks, and solvency risks for the com-mercial banking sector. I argue that restrictions and caps will be the new specifications of a regulatory framework for CBDCs if disintermediation in the banking sector is to be prevented. I identify the anonymity of CBDCs as a comparative disadvantage that will affect their adoption. These findings provide insight into governance problems facing central banks, and coherently lead to the design of the Sand Dollar. I conclude by suggesting that combating cryptocurrencies is a task that cannot be solved by a CBDC.
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