According to a Bank of America report, there is a possibility that the United States will proceed to issue its own Central Bank Digital Currency (CBDC) between 2025 and 2030.
Bank of America strategists Alkesh Shah and Andrew Moss, who described CBDCs as an inevitable evolution of today’s electronic currencies, noted that a Central Bank Digital Currency would be a liability of the U.S. Federal Reserve.
CBDC Benefits Outweighs the Downside
The strategists stated in a note reported by Bloomberg on Monday that some of the benefits of a CBDC include preserving the dollar’s value, increasing financial inclusion, and improving cross-border payments.
In the same vein, the report highlighted some potential risks, including growing liquidity risk in the financial system when commercial bank deposits are converted to CBDCs and shifting the financial market structure via shifting deposits.
However, according to Bank of America, these risks can be mitigated based on the design of the CBDC.
Before proceeding to issue its own Central Bank Digital Currency, Bank of America noted that it is imperative to consider certain factors to develop a privacy-protected, intermediated, and identity-verified CBDC.
In the meantime, the bank noted that the usage of private cryptocurrencies, especially stable coins, will surge. According to the report, stable coins used as a form of payment for cross-border remittances have increased.
The report writes:
“We expect stablecoin adoption and use for payments to increase significantly over the next several years as financial institutions explore digital asset custody and trading solutions and as payments companies incorporate blockchain technology into their platforms.”
U.S. to Join CBDC Party
Several countries have launched efforts toward developing their own CBDCs as demand for fiat declines. China, India, and Australia are close to unveiling their CBDCs.
Meanwhile, the U.S. has been skeptical about issuing a CBDC.
Following the growing interest in cryptocurrencies, the Federal Reserve discussed developing its coin in a 35-page report last week, adding that it will not proceed with its plans until it gets support and clearance from the White House and Congress.