Bank of America: US CBDC could be released as early as 2025

This article comes fromDecrypt, original author: Mathew Di Salvo

Odaily Translator | Nian Yin Si Tang

Summary:

This article comes from

, original author: Mathew Di Salvo

Odaily Translator | Nian Yin Si Tang

secondary title

Summary:

- Bank of America talks about the benefits of a U.S. central bank digital currency in a new report.

- The report states that a US CBDC could be launched as early as 2025.

Bank of America said on Monday that a central bank digital currency is an "inevitable evolution of today's electronic money," and that the U.S. could launch its own CBDC as early as 2025.

In a report titled "US CBDC: First Step in a Long Journey," Bank of America noted that a central bank digital currency (CBDC) would be different from existing digital currencies available to the public. Currency because it will be a liability of the Federal Reserve and not a commercial bank, meaning the digital currency has no credit or liquidity risk.

The report also said that the U.S. would benefit from issuing a CBDC because it has the potential to maintain the dollar's status as the world's reserve currency, but it did not elaborate on how the digital currency would achieve this.

“We expect a U.S. CBDC to be launched between 2025 and 2030,” the report reads, “potential benefits include maintaining the U.S. dollar as the world’s reserve currency, improving cross-border payments (the average cost of sending $200 from the U.S. 5.4% of transaction value in Q2 2021), increasing financial inclusion (approximately 5% of US households were unbanked in 2019), and leveraging new use cases offered by digital currencies.”

Some countries, such as China and the Bahamas, have even launched or are testing CBDC projects. But the U.S. is still studying the benefits of having a CBDC. It is not difficult to see that the United States is already lagging behind in this field.

According to BloombergThe bank pointed out that if commercial bank deposits are converted into CBDC, the risks of issuing CBDC may include increasing the liquidity risk of the financial system. In other words, if the bank's customers suddenly digitized their cash, there could be a cash shortage.

The report also said that a CBDC could reduce the "efficiency of monetary policy implementation," that is, it could change the way the Federal Reserve currently prints and injects cash into the financial system to stimulate the economy.

At the same time, the bank suggested that the U.S. must focus on making CBDCs “privacy-preserving,” intermediary (meaning the private sector must provide products such as wallets to hold them) and transferrability. In its report, Bank of America added that a U.S. CBDC would also have to be authenticated to prevent crime.

The report also said that in the absence of a CBDC, the use of stablecoins is likely to increase, adding that the two largest stablecoins by market capitalization - USDT and USDC - had a combined market capitalization of approximately $121 billion as of Jan. 21. The use of both as a means of payment is increasing, especially in cross-border money transfers, as they are faster and cheaper than fiat currencies.

According to Bloomberg