Bank of America Says CBDCs Are the Future of Money and Payments

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Source: Coindesk

Digital currencies, such as central bank digital currencies (CBDCs) and stablecoins, are the natural evolution of money and payments, Bank of America said in a research report on Tuesday.

“CBDCs do not change the definition of money, but will likely change how and when value is transferred over the next 15 years,” analysts led by Alkesh Shah wrote, adding that central bank digital currencies have “the potential to revolutionize global financial systems and may be the most significant technological advancement in the history of money.”

CBDCs typically use blockchain technology to increase efficiency and lower costs. A stablecoin is a type of cryptocurrency whose value is pegged to another asset, such as the U.S. dollar or gold.

The benefits and risks of CBDCs depend on their design and issuance, but Bank of America expects central banks in developed economies to focus on payments efficiency and those on developing countries to focus on financial inclusion.

Still, CBDCs aren’t without their risks. They may drive competition with bank deposits, and could lead to a loss of monetary sovereignty and inequality among countries globally, the note said.

CBDC issuance may not happen for over a decade in some counties, but central banks are expected to “adopt technological advances or risk irrelevance over the longer term,” the note added.

Bank of America says it expects central banks and governments will drive digital-asset innovation with input from the private sector.

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