According to a recent note from Bank of America analysts, a CBDC would be distinct from existing digital currencies in that it would be backed by the Federal Reserve, not a commercial bank.
According to Bank of America, the United States looks to be getting closer to developing its own central bank digital currency (CBDC).
According to a Bloomberg storey, Bank of America crypto strategists Andrew Moss and Alkesh Shah stated in a Jan. 24 note that CBDCs “are an inevitable progression of today’s electronic currencies.” According to the analysts:
“Over the next few years, we anticipate stablecoin acceptance and usage for payments to grow dramatically as financial institutions investigate digital asset custody and trading solutions and as payment businesses integrate blockchain technology into their platforms.”
Meanwhile, a Federal Reserve Bank (FRB) research released on Jan. 20 titled “Money and Payments: The US Dollar in the Age of Digital Transformation” assessed the merits and downsides of the US possibly adopting a CBDC.
It assessed whether a CBDC might potentially “enhance the domestic payments system’s safety and effectiveness” for consumers and companies as “the payments system evolves,” perhaps leading in “faster payment choices across nations.”
Meanwhile, Shah and Moss noted that the usage of private company-issued digital currencies is expected to increase. At the moment, private businesses such as commercial banks are responsible for current types of digital money such as online bank accounts or payment applications.
A CBDC, on the other hand, would be unique in this regard since it would be the responsibility of a central bank, such as the Federal Reserve, the FRB said in a statement on the findings.
Additionally, it highlighted possible obstacles, such as sustaining financial stability, ensuring users’ privacy, and combating illegal transactions. The Federal Reserve has extended the deadline for public feedback on these matters until May 20.
A CBDC is a cryptocurrency that is a digital representation of a country’s fiat currency, such as the US dollar. They first gained prominence in 2020, when The Bahamas introduced the world’s first CBDC, the “Sand Dollar.”
Meanwhile, China’s central bank is constructing a digital yuan wallet as part of its ongoing attempts to establish a digital currency. Sweden’s central bank concluded the first phase of its “e-krona” digital currency trial programme in April 2021.
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