Bank of America: Stablecoin adoption and CBDC rollout are 'inevitable'

The U.S. appears to be finally moving ahead with creating its own central bank digital currency (CBDC), according to Bank of America.

According to Bloomberg, Bank of America crypto strategists Andrew Moss and Alkesh Shah wrote in a report on Jan. 24 that CBDCs “are an inevitable evolution of today’s digital currencies.” Two analysts wrote:

“We expect the adoption and use of stablecoins to increase significantly in the coming years as financial institutions explore digital asset custody and trading solutions, and payments companies incorporate blockchain technology into their platforms.”

Meanwhile, the U.S. Federal Reserve Bank (FRB) published a report titled “Money and Payments: The Dollar in the Age of Digital Transformation” on Jan. 20, weighing the pros and cons of a possible U.S. adoption of a CBDC.

It considers whether a CBDC has the potential to "improve a safe and efficient domestic payment system" for households and businesses, potentially leading to "faster payment options across countries" as "the payment system continues to evolve".

Meanwhile, Shah and Moss say the use of digital currencies issued by private companies is likely to grow. Currently, responsibility for existing forms of digital currency such as online bank accounts or payment apps rests with private entities such as commercial banks.

However, a CBDC would be different in this regard, as it would be the responsibility of central banks such as the Federal Reserve, the FRB wrote in a statement on the report.

It also pointed to potential difficulties, including maintaining financial stability, protecting user privacy and combating illicit transactions. The Fed has been asking the public for comments on these issues until May 20.

A CBDC is a digital version of a country's fiat currency, such as the U.S. dollar. In 2020, the Bahamas launched the world's first CBDC, the "Sand Dollar", and CBDC began to attract attention.

Meanwhile, the People's Bank of China is developing a digital yuan wallet, stepping up efforts to create a digital currency. In April 2021, the Riksbank completed the first phase of its "e-krona" digital currency pilot.

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