According to recent reports, Bank of America says digital currencies appear inevitable, adding that stablecoins and digital currencies launched by the Central bank are a natural evolution of today’s monetary and payment systems. The bank also expects the private sector beneficiaries to emerge in all phases of CBDC implementation.
BOA on the future of money and payments
Bank of America’s research team published a report on global crypto, digital assets, and CBDC earlier this week. The bank wrote that digital currencies appear to be inevitable. They view disturbed ledgers and digital currencies, such as stablecoins and CBDCs, as a natural evolution of today’s payment systems.
BOA explained that their view is that CBDCs that leverage distributed ledger technology can revolutionize global financing systems and may be the most significant technological advancement in the history of money. The report also explains that there are 114 central banks using CBDCs present in 58 countries globally and over 95 percent of the global GDP. It also mentioned that the central bank digital currencies do not change the definition of money, but it will likely change how and when value is transferred over the next 10 – 15 years.
According to the BOC, digital currency issuances by central banks are inevitable for three main reasons. Firstly, they may increase the efficiency of cross-border and domestic payments and money transfers. In addition, they would decrease the chances of the central bank’s risk of losing monetary control and increase financial inclusion.
BOA wants private sectors to emerge in CBDC development
Bank of America says digital currencies are inevitable and could be the future of payments and money transfers. However, the report published by BOA says that without the help of the private sector, it would not be possible for central banks and governments to build a new financial system based on distributed ledger technology. They said that the private sectors are critical for CBDC development and expect them to emerge in all phases of CBDC implementation.
The bank also pointed out some risks. They warned that CBDC issuance and adoption could also increase the frequency of bank runs if not properly designed, adding that during lines of stress in the banking system, people could withdraw deposits and exchange them for CBDCs, given that there is no credit or liquidity risk if distributed with the direct and hybrid approaches. This would increase the financial stability risks.
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