Bank of America Says a Digital U.S. Dollar Is Inevitable
The U.S. is likely to move ahead with its digital currency plans, with the issuing taking place by 2025. According to the Bank of America Corp., the U.S. government-backed coins, also referred to as Central Bank Digital Currencies (CBDCs), are an unavoidable development in today’s electronic currencies. This initiative will help the cryptocurrencies by private firms to grow significantly in the long run.
Fed’s Plan for Digital Dollar
The Federal Reserve has created a 35-page paper beginning the week, terming it as a first step towards the currency. However, the central bank mentioned that no further progress could be made without support from the Whitehouse and Congress. The digital dollar is meant to have a wide variety of benefits, including making cross-border payments cheaper and faster, among others.
According to the FED, in the absence of the U.S. CBDC, stablecoins (Tether and USDC) from private companies will increase in usage since they are pegged against the dollar and other fiat currencies.
The stablecoins are often resilient against wild price moves in the market and are likely to blossom. The expectation is that the stablecoin adoption and their use as means of payment will increase significantly within the next few years.
Preserving the Dollar Status
This move by the Fed to launch digital dollars will preserve the dollar status as the global reserve currency. The digital dollar will also improve cross-border payments and increase financial inclusion among other functions and benefits.
However, there are potential risks that could emerge from this development. Among these include the changing of the financial sector structure and shifting deposits. There could also be increased liquidity risks in the financial system if commercial banks deposits are converted to CBDC. However, the main concern before issuing CBDC will be the need for privacy protection.
* We hope this information will help you in your investment process, but this is not investment advice. Every investment carries risk, especially in this industry, so DYOR before making a decision.