The Bank of America believes that a USD central bank digital currency (CBDC) is “inevitable”, and that it would take on a massive role in the monetary system by 2030.
A US CBDC is inevitable
CBDCs are gaining interest among central banks, with many outlining plans to release such products in the future. The term ‘digital currency’ is technically a misnomer as money is already held on private digital ledgers.
Last year, US Fed Chairman Jerome Powell outlined that a new digital payment system would be launched within four years. By doing so, Powell accelerated discussions about the eventual launch of ‘Fedcoin’, which would potentially exist alongside private stablecoins like USD Tether.
Similarly, the Bank of America believes that such a product will be launched between 2025 and 2030.
Citing bank strategists Alkesh Shah and Andrew Moss, Bloomberg reported that CBDCs “are an inevitable evolution of today’s electronic currencies.”
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China-style surveillance CBDC Won’t Work
Back in April 2021, the Fed Chairman noted that a China-style central bank digital currency wouldn’t work in the United States.
The currency that is being used in China is not the one that would work here. It’s one that really allows the government to see every payment for which it is used in real time.
The Federal Reserve released a cost-benefit report last week about a prospective central bank digital currency. The paper said it could lead to faster settlements and cheaper transactions. On the other hand, CBDCs could work against people’s privacy since the government could monitor and control their issuance and transactions.
If designed incorrectly, a central bank digital currency could be weaponised against users as is the case with the Chinese Communist Party-controlled digital Yuan.
Stablecoins will Gain momentum
Today, stablecoins are an essential part of the crypto industry, evidenced by their overwhelming growth in the last years to multi-billion dollar sub-sectors in crypto. As of today, USDT and USDC are among the top five currencies by marketcap.
The Bank of America strategist believes this trend will only continue in the following few years, especially if the US takes a back-seat with its CBDC.
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. – the note concluded.
Powell recently noted that CBDCs and stablecoins can coexist in a modern and digital economy, hinting to observers that stablecoins are unlikely to be banned.
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