Bank of America, the US’s second-largest bank by assets, released a research paper on the 28th which noted that Central Bank Digital Currency (CBDC) is a far more effective payment method than cash and the adoption of it is ‘inevitable’.
There is a growing interest in CBDC amongst central banks across the world. In May, a blockchain infrastructure platform Bison Trails released a study that revealed that approximately 80% of the central banks are examining the use cases of CBDC, 40% of which are already testing their proof-of-study programs.
The research paper noted that adoption of CBDC is ‘inevitable’ citing various advantages of it. The bank also said that those central banks who did not issue their own digital currency could see a declining currency demand in their countries and minimize their ‘global role’.
However, the US still needs to overcome some challenges that might lead to the downfall of the project. Problems such as CBDC competing with bank deposits, spurring bank runs, and jeopardizing user security are necessary to solve before the rollout of digital currencies.
The report noted that stablecoins are highly risky and could present financial instability ‘during times of market stress when there may be a crypto to fiat currency run’.
Recently, Bank of America has increased its dedication towards providing cryptocurrency-related services as well as exploring this industry’s potential.
According to a memo reviewed by CoinDesk, Bank of America has currently set up a team committed to researching crypto-assets and related technologies. The bank has even allowed some of its clients to trade in Bitcoin futures. Its prime brokerage division has launched clearing and settlement services of crypto ETPs (Exchange-Traded Products) for hedge funds in Europe.
