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Bank of America: Stablecoin Adoption and CBDCs 'inevitable'

 


In a recent Bank of America note, analysts explain that a CBDC would differ from current digital currencies because responsibility for it would rest with the US Federal Reserve and not a regular bank.


In the United States, development of a central bank digital currency may now be moving forward, comment from Bank of America signals.


Two Bank of America crypto strategists, namely Andrew Moss and Alkesh Shah, said on Monday that CBDCs are "an inevitable evolution of today's electronic currencies," according to a Bloomberg report . Specifically, the analysts said:


"We expect stablecoin adoption and use in payments to grow significantly over the next few years as financial institutions explore solutions for custody and trading of digital assets and payment processors integrate blockchain technology into their platforms."

On Thursday, the US Federal Reserve published a report on the US dollar in times of digital change. The report, originally titled "Money and Payments: The US Dollar in the Age of Digital Transformation," weighs the pros and cons of a potential CBDC adoption in the US.


It discussed whether a CBDC could improve the "secure and effective domestic payment system" for households and businesses as "the payment system evolves" and potentially lead to "faster payment options between countries".


Meanwhile, according to Shah and Moss, the use of digital currencies issued by private companies is likely to increase. Currently, private entities such as commercial banks are responsible for the current forms of digital currencies such as online bank accounts or payment apps.


It would be different with a CBDC because the responsibility would lie with a central bank, such as the US Federal Reserve, the US Federal Reserve wrote in a statement accompanying the report .


She also highlighted the potential challenges such as maintaining financial stability, protecting user privacy and fighting illegal transactions. The US Federal Reserve has invited the public until May 20 to comment on this discussion and questions.


A CBDC is the digital version of a country’s fiat currency, such as the US dollar. These emerged in 2020 when the Bahamas launched the world's first CBDC , namely the Sand Dollar.


The Chinese central bank is currently working on a digital yuan wallet . The country has become one of the leading countries in terms of developing a CBDC. In April 2021, the Swedish central bank completed the first phase of its CBDC pilot project . The digital currency is called "e-Krona".

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