US CBDC is ‘inevitable’, says Bank of America
The bank says in the absence of a US CBDC, stablecoins will likely flourish
A US central bank digital currency (CBDC) is “inevitable”, according to two strategists at the Bank of America, with its arrival likely coming between 2025 and 2030.
Alkesh Shah, global crypto and digital asset strategist, and Andrew Moss, global research strategist, both at Bank of America, said in a report seen by Bloomberg that CBDCs “are an inevitable evolution of today’s electronic currencies”.
Until CBDCs arrive, they believe the use of digital currencies issued by private entities will probably grow.
The Fed’s opinion on the matter
The US Federal Reserve recently released a paper on developing its own CBDC. However, the Fed did say that the paper is just a first step and it does not intend to proceed with the development of a CBDC without support from the White House and Congress.
In the paper the Fed stated that a CBDC could have an array of benefits such as making cross-border payments cheaper and faster. As well as providing a “safe, digital payment option for households and businesses”. Still, a CBDC also comes with risks like possible runs on financial firms and a reduction in the number of deposits in the banking system.
The conclusion of a House of Lords’ inquiry into CBDCs in the UK also found that the creation of a UK CBDC could lead to a run on the banks during economic downturns.
The Fed invited comments from the public regarding the discussion of a US CBDC and if it can “improve the safe and effective domestic payments system”.
Jerome H. Powell, chair of the Federal Reserve, said: “We look forward to engaging with the public, elected representatives, and a broad range of stakeholders as we examine the positives and negatives of a central bank digital currency in the United States.”
The Fed has given the public until the 20 May to send in comments on CBDCs.
Stablecoins will thrive if a CBDC does not arrive
Shah and Moss from the Bank of America believe in the absence of a US CBDC, other cryptos and stablecoins will likely flourish in the near future.
The pair said: “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.”
