Bank of America addresses CBDC as a ‘more effective’ alternative to cash - Research
The Bank of America which is second to the largest U.S. bank has admitted that the rise of central bank digital currency (CBDC) is inevitable, and a “much more effective payment system than cash”
- The Bank of America (BofA) with an estimated asset valued at $2.32 trillion is the second-largest bank in the U.S. to date, next to JP Morgan Chase & Co.
- The report which comes amidst surging interest for CBDC across the world, trails a recent testimony by Julia Friedlander, urging the U.S. government to take urgent steps
- BofA cautioned that central banks that did not launch their own digital currencies may witness a drop in demand for their currencies.
The second-largest bank in the United States has joined others in calling for a central bank digital currency (CBDC) in the country. According to a research paper published by the Bank of America (BofA), CBDC is “a much more effective payment system than cash.”
While BofA is not the first to advocate for the U.S. government to embrace CBDC, they are joining a host of other institutions and individuals who are also of the same opinion.
For instance, Julia Friedlander, a senior fellow for transatlantic economic relations in the US recently spoke before the House Committee on Finance Services about the urgency in the topic of CBDCs.
According to the Washington-based economist, more than 90% of the world economy supports CBDC, making the United States the furthest and least progressive country in terms of CBDC adoption.
Speaking further on the need to take urgent action, BofA said that CBDC adoption is “inevitable,” and went on to cite some reasons to back its claim.
According to the bank, the declining role for cash, the private sector’s increasing use of blockchain technology, and loss of control over currency and CBDCs’ potential to boost the economy are some of the driving factors for CBDC adoption.
The bank went further by cautioning that any central banks that fail to launch their own digital currency stand the risk of witnessing decreasing demand for their currencies, however,
“substantially in some cases,” and a smaller “global role.”
BofA research also addressed general concerns CBDC
As much as the Bank of America is clamoring for CBDC adoption in the U.S., the research published also cautioned that central banks must do so using a “very cautious approach.”
CBDCs qualified as money, according to the study, because they provide for the storage of value and serve as a unit of account and a means of exchange. More so, this distinguishes them from cryptocurrencies that “do not meet these characteristics,” and “Since they are traded, they could be seen as an asset class,” the paper said.
Ultimately, BofA is looking beyond CBDC adoption in the U.S. The bank has been on in toes in recent times, setting up a dedicated team of crypto experts in-house to researching cryptocurrencies and related technologies. With this in place, the bank would be justified in lending its support to the CBDC adoption campaign in the United States.