Central bank digital currencies (CBDCs) are coming, but a digital dollar is unlikely in the near term, Bank of America (BAC) said in a report on Monday.
A CBDC is a digital currency that is issued by a government and is normally a tokenized form of the country’s fiat currency.
“The Federal Reserve (Fed) continues to pilot CBDCs but has not committed to a CBDC and will not issue one without executive branch and Congressional support,” analysts led by Alkesh Shah wrote.
“CBDC benefits and risks depend on the design and issuance approach, but we expect CBDCs to provide a more efficient and less costly payment system for cross-border and domestic payments, a tool for monetary policy implementation and improved financial inclusion,” the authors wrote.
Still, “they may also drive competition with bank deposits, more frequent bank runs, loss of monetary sovereignty and tensions among countries globally,” the bank said.
Central banks and governments are expected to drive digital asset innovation by “leveraging the private sector and beneficiaries to emerge across all phases of CBDC implementation.”
Bank of America reiterates its view that CBDCs have the “potential to revolutionize global financial systems.”
The Swiss National Bank (SNB) said earlier this month that it was working on a wholesale CBDC pilot alongside the SIX Digital Exchange (SDX) and six commercial banks.