According to the Bank of America, the United States appears to be on the verge of launching its own central bank digital currency (CBDC).
CBDCs “are an inevitable progression of today’s electronic currencies,” according to a Bloomberg report by Bank of America crypto analysts Andrew Moss and Alkesh Shah in a note dated January 24. According to the experts:
“As financial institutions explore digital asset custody and trading solutions and as payments businesses incorporate blockchain technology into their platforms, we predict stablecoin adoption and use for payments to rise considerably over the next several years.”
Meanwhile, the Federal Reserve Bank (FRB) published research on Jan. 20 titled “Money and Payments: The US Dollar in the Age of Digital Transformation” that examined the merits and cons of the US adopting a CBDC.
It looked into whether a CBDC could help consumers and businesses “better the secure and effective domestic payments system” as “the payments system continues to grow,” potentially leading to “faster payment choices between nations.”
CBDC would be the responsibility of the central bank
Meanwhile, according to Shah and Moss, the use of digital currencies generated by private enterprises is likely to increase. Currently, private businesses such as commercial banks bear liability for existing types of digital currency. Such as online bank accounts or payment apps.
A CBDC, on the other hand, would be different in this regard. Because it would be the responsibility of a central bank, such as the Federal Reserve. According to a statement released by the FRB in response to the report.
It also identified potential challenges, such as maintaining financial stability, protecting users’ privacy, and combating illicit transactions. The Federal Reserve has extended the deadline for public comment on these topics to May 20.
A CBDC is a digital representation of a nation’s fiat currency, such as the US dollar. The Bahamas launched the world’s first CBDC, the “Sand Dollar”, in 2020. Putting them in the spotlight for the first time.
Meanwhile, as part of its efforts to build a digital currency, China’s central bank is constructing a digital yuan wallet. The first phase of Sweden’s “e-krona” digital currency project was finished in April 2021.