Bank of America made a bold prediction: digital currencies seem inevitable. Is the future of digital banking tokenized and on the blockchain? It seems so, but there is a caveat.
Bank of America's global research team recently released a report in which they study cryptocurrencies, digital assets, and central bank digital currencies. The report is quite clear about the position of the American banking giant's research team.
Digital currencies, whatever the type, are unavoidable.
According to the report, distributed ledger and digital currencies, both CBDCs and stablecoins, are a natural evolution to current monetary systems. The bank then reaffirms that CBDCs, if well implemented, can revolutionize the financial system as a whole. They also state that this could be the most significant technological advance in the history of money.
The bank claims that CBDCs are inevitable for three main reasons. On the one hand, they would increase the efficiency of domestic and international payments and transfers. On the other, it would ensure that banks do not lose monetary control. Finally, it would also improve financial inclusion in much of the world.
However, they argue that the private sector must assist in developing CBDCs. According to Bank of America, central banks cannot create this technology independently.
But CBDCs do not come without risks. According to the report, a poorly designed CBDC could increase the frequency of bank failures. In other words, an exploitable gap would pose a threat to the financial stability of the system.
Likewise, BoA believes CBDCs are likely to displace stablecoins. Of course, provided they are interoperable with known blockchains.
Currently, 114 central banks are exploring the idea of developing CBDCs — about 58% of the world's countries and more than 95% of the world's GDP. While these currencies are not intended to change the definition of money, they will undoubtedly transform the system over the next 15 years.