Bank of America says that “digital currencies seem inevitable,” adding that central bank digital currencies (CBDCs) and stablecoins are “a natural evolution of today’s currency and payment systems.” It states. The bank expects “private sector beneficiaries to emerge in all phases of CBDC implementation.”
Bank of America on Future of Money and Payments
Bank of America’s (BOA) Global Research team earlier this week published a report on global cryptocurrencies, the Digital Assets, and Central Bank Digital Currencies (CBDC) reports. The bank writes:
Digital currencies seem inevitable. We see distributed ledgers and digital currencies, such as CBDC and stablecoin, as a natural evolution of today’s currency and payment systems.
“It is our view that CBDC, leveraging distributed ledger technology, has the potential to revolutionize the global financial system and may be the most significant technological advancement in the history of money,” BOA explains.
The report explains that 114 central banks are currently considering CBDCs, representing 58% of the world’s countries and over 95% of global GDP. It also states that central bank digital currencies “will not change the definition of money, but are likely to change how and when value is transmitted over the next 15 years.”
According to Bank of America, “Central bank issuance of CBDCs seems inevitable for three reasons.” First, they “may increase the efficiency of cross-border and domestic payments and remittances.” In addition, they “may reduce the risk of central banks losing monetary control” and “increase financial inclusion.”
The private sector is important to the development of CBDCs
The Bank of America report elaborates, adding that “the private sector is critical to the development and issuance of CBDCs.”
Central banks and governments cannot build a new financial system based on distributed ledger technology alone and have indicated their intention to leverage the private sector to drive innovation in digital assets. private sector beneficiaries in all phases of CBDC implementation We expect that.
For example, the report notes that the government may “award contracts to payment and consulting firms in exchange for expertise.”
Bank of America also points out several risks.” The issuance and adoption of CBDCs, if not properly designed, could increase the frequency of bank runs.” He warns, “In times of stress in the banking system, people may withdraw their deposits and exchange them for CBDCs, increasing financial stability risk, since there is no credit or liquidity risk if distributed through the direct and hybrid approaches.” He adds. We conclude that.
However, central banks can mitigate this risk by introducing temporary or permanent restrictions on CBDC holdings.