Bank Of America: Digital Dollar Is Inevitable

US authorities remain indecisive in regards to a centrally managed currency. However, the Bank of America, believes that an American CBDC can not be avoided and that a digital dollar is likely to emerge in the US over the next several years, most likely between 2025 and 2030. Two Bank of America strategists, Alkesh Shah and Andrew Moss, were cited in a recent Bloomberg report where they stated that CBDCs are an inevitable evolution of today’s electronic currencies.

CBDCs have been a growing trend among central banks around the world. Many have created plans to develop and launch a native digital currency, while others have already begun creating one. A few of these currencies have even launched, including China’s digital yuan, which is about to become available country-wide, just in time for this year’s Winter Olympics.

At the same time, the US remains reluctant to move forward with a CBDC, in part because they want to properly and proactively minimize associated economic risks. Fed Chair Jerome Powell has said as much, insisting that doing it right is more important than being the first to launch a CBDC.

The Federal Reserve recently published a report that focused on the advantages and disadvantages of CBDCs, stating that a native digital currency could lead to faster settlements and less expensive transaction costs. However, it might also threaten privacy, as all CBCD transactions would be visible to the government.

Stablecoin adoption sees a rapid increase

Stablecoins have grown to become important assets in the crypto sector. Over the last several years, they have captured a multi-billion dollar portion of the cryptocurrency market. Right now, in January 2022, two of the top 5 largest cryptocurrencies by market cap are stablecoins — Tether (USDT) with a market cap of $78.2 billion and USD Coin (USDC) with a market cap of $48.2 billion.

The Bank of America’s strategists see the market capitalization of stablecoins continuing to grow over the next few years, especially if the US continues to stall with the creation of its own native CBDC stablecoin.

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