- Bank of America stated that CBDCs have the potential to alter global financial systems.
- CBDC is often a tokenized version of the nation’s fiat money issued by government.
Bank of America (BAC) stated in a research on Monday that central bank digital currencies (CBDCs) are on the horizon, but will not occur in the near future. The report found that 33% of the world’s central banks, representing 67% of nations and 98% of global GDP, are actively investigating CBDCs.
A government-issued digital currency known as a CBDC is often a tokenized version of the nation’s fiat money. Also, the Federal Reserve has not committed to a CBDC and would not issue one without backing from the executive branch and Congress, according to a group of experts led by Alkesh Shah.
The authors mentioned:
“CBDC benefits and risks depend on the design and issuance approach, but we expect CBDCs to provide a more efficient and less costly payment system for cross-border and domestic payments, a tool for monetary policy implementation and improved financial inclusion.
Competing With Bank Deposits
Moreover, it is anticipated that governments and central banks would be the driving forces behind the development of new digital assets by leveraging the private sector and benefactors to emerge throughout all phases of CBDC deployment.
The bank stated:
Still, “they may also drive competition with bank deposits, more frequent bank runs, loss of monetary sovereignty and tensions among countries globally.”
Furthermore, in a statement released today, Bank of America reaffirmed its belief that CBDCs have the potential to fundamentally alter global financial systems. According to a paper published by Bank of America in January this year, digital currencies such as CBDCs and stablecoins represent the next logical step in the development of fiat currency and electronic transactions.
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