In a research report on Tuesday, the Bank of America (BoA) said that “Central Bank Digital Currencies (CBDCs) and stablecoins are the natural evolution of money and payments.”
Both CBDCs and stablecoins – a type of currency pegged to other assets such as USD or Gold – use blockchain technology to increase efficiency and lower costs.
While the benefits and drawbacks of both these digital currency types depend on how they’re designed, and who issues them, the Bank of America stated that “CBDCs can revolutionize global finance and may be the most significant technological advancement in the history of money,” and that “CBDCS will likely change how value is transferred over the next 15 years.”
It’s important to note that CBDCs aren’t without risks as they may drive competition between banks such as by enticing people to deposit more by providing certain benefits. The introduction of CBDCs could also lead to a loss of monetary autonomy, privacy and equality among countries worldwide.
The BoA expects CBDCs to be used for payments efficiency in developed countries, and financial inclusion in developing countries. The BoA also noted that CBDC issuance may not happen for over a decade in some countries but Central Banks will “adopt technological advances or risk irrelevance over the longer term.”
Bank of America says it expects central banks and governments will drive digital-asset innovation with input from the private sector.