U.S. CBDC Is Unlikely in the Near Term: Bank of America (2024)

FAQs

U.S. CBDC Is Unlikely in the Near Term: Bank of America? ›

10 Years of Decentralizing the Future

A UK House of Lords economic affairs committee report concluded that a CBDC poses two main security risks: first, that individual accounts could be compromised through cybersecurity weaknesses; and, second, that a centralised CBDC ledger could be a target for attack from “hostile state and non-state actors”.

U.S. President Joe Biden ordered officials to look into a digital dollar in 2022 but it has become a divisive political issue with Biden's Republican rival in this year's U.S. election race, Donald Trump, vowing not to allow it.

Results: The impact of a CBDC is much lower after taking into account that households enjoy the complementarity between deposits and other financial products within the same bank, which gives banks a competitive advantage over the CBDC.

Will a U.S. CBDC replace cash or paper currency? The Federal Reserve is committed to ensuring the continued safety and availability of cash and is considering a CBDC as a means to expand safe payment options, not to reduce or replace them.

With the number of banks fixed, banks respond to the introduction of CBDC by increasing the deposit rate as banks attempt to maintain market share. If the number of banks is able to adjust, the deposit market becomes more concentrated following the introduction of CBDC.

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.

For instance, using cash instead of credit or debit cards may help keep some people from overspending, because you can see how little is left in your wallet after every purchase. In short, getting rid of cash would impose hardships on society's most vulnerable people and could jeopardize our privacy.

Luckily, it's unlikely that we will completely do away with cash — at least not any time soon. This means more time for small businesses to get comfortable before they take the mandatory leap into digital payments. 71% of consumers intend to continue using cashless payments in the future.

Which banks are going CBDC? ›

Participating banks include BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo.

These countries view CBDCs as a way to maintain their global political and economic power and influence. In short, public demand aside, CBDCs may indeed be inevitable.”

Many central banks seek to establish greater local governance over increasingly global payment systems. Central banks see CBDC as a potential stabilizing anchor of local digital payment systems.

So far, the US is still in an exploratory phase with the Biden administration announcing an executive order in 2022 that led to further research into digital currencies.

If it's been a long time since you pulled out actual dollars and coins to pay for something — here's a conversation for you. It might seem like cash is slowly becoming obsolete. But, Brett Scott says it's a false narrative that we're all pining for a cashless society.

1 The United States doesn't yet have a CBDC as of 2024 but it's important to understand the concept with this option under discussion, as well as the benefits and risks attached and steps toward implementation.

A central bank digital currency (CBDC) is a digital version of a country's central bank money or fiat currency. Fiat money is not tied to a physical commodity such as gold or silver. The role of a central bank is to support financial services, set monetary policy and issue currency.

Possibility of breaching user privacy and creating a surveillance state: Depending on the design of the CBDC system, there is a risk that user privacy could be compromised or that the system could be used for surveillance purposes.

If the CBDC rate is high, individual holding limits increase welfare by reducing financial stability risks. By contrast, imposing holding limits for a low CBDC rate can only increase the risk of bank runs, and therefore reduce welfare.

Given the uncertainty about the demand for CBDC, setting holding limits may involve a process of trial and error. Second, a CBDC may weaken financial stability by reducing the ability of banks to extend credit during times of stress.