Stablecoin adoption and CBDCs ‘inevitable’, says Bank of America
According to Bank of America, the United States is set to finally move forward in creating its own central bank digital currency (CBDC).
Bank of America’s crypto strategists Andrew Moss and Alkesh Shah have written in a January 24 note that CBDCs would be “an inevitable evolution” of the present day’s electronic currencies.
The analysts have written that they expect stablecoin adoption to mainstream and its usage e for payments to increase significantly in the coming several years with financial institutions exploring digital asset custody and trading solutions. This would speed up as payments companies start incorporating blockchain technology into their platforms.
A report titled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation” prepared by the Federal Reserve Bank (FRB) has also listed the benefits and disadvantages of the USA while adopting a CBDC.
The report has considered whether a CBDC could be potential in improving the safe and effective domestic payments system for the household and businesses ecosystem. It said that since the payments system is continuously evolving, it is possible the resulting effects would be a “faster payment option between countries.”
Shah and Moss have even stated the use of digital currencies that are issued by private companies is most likely “to grow.” At present, the liability for existing forms of digital currency such as online bank accounts or other payment apps belongs to private entities like commercial banks.
CBDCs, however, would be different in this aspect as they would be the liability of a central bank like the US Federal Reserve, as mentioned in the report.
The report has also pointed out possible difficulties that include preserving financial stability, protection of user privacy and combat of illicit transactions.
The Fed has even opened for public comment on these issues until May 20.
CBDCs had started gaining spotlight in 2020 when The Bahamas had launched the world’s first CBDC called the Sand Dollar.
Simultaneously, the Chinese central bank is in the process of development of a digital yuan wallet as it is reportedly stepping up efforts to create a digital currency. Sweden’s central bank had completed its first phase of its “e-krona” digital currency pilot in April 2021.