Bank of America crypto strategists Andrew Moss and Alkesh Shah wrote in a Monday note that CBDCs “are an inevitable evolution of today’s electronic currencies,” according to a Bloomberg report. The analysts wrote:

“We expect stablecoin adoption and use for payments to increase significantly over the next several years as financial institutions explore digital asset custody and trading solutions and as payments companies incorporate blockchain technology into their platforms.”

Meanwhile, a Thursday report titled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation” from the Federal Reserve Bank (FRB) weighed up the benefits and disadvantages of the U.S. potentially adopting a CBDC.

It considered whether a CBDC could potentially “improve the safe and effective domestic payments system” for households and businesses as “the payments system continues to evolve,” possibly resulting in “faster payment options between countries.”

In the meantime, Shah and Moss stated that the use of digital currencies issued by private companies is likely to grow. Currently, the liability for existing forms of digital currency like online bank accounts or payment apps belongs to private entities, such as commercial banks.

However, a CBDC would be different in this respect because it would be the liability of a central bank such as the U.S. Federal Reserve, wrote the FRB in a statement about the report.

It also pointed out potential difficulties, including preserving financial stability, protecting the privacy of users, and combatting illicit transactions. The Fed has opened the floor for public comment on these issues until May 20.

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A CBDC is a digital version of a country’s fiat currency, such as the U.S. dollar. They started to step into the spotlight in 2020 when The Bahamas launched the world’s first CBDC, the Sand Dollar.

Meanwhile, China’s central bank is in the process of developing a digital yuan wallet as it steps up its efforts to create a digital currency. In April 2021, Sweden’s central bank completed the first phase of its “e-krona” digital currency pilot.