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

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.

Edited by Sheldon Reback.

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

FAQs

Is Bank of America going to 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.

Is a CBDC a risk for banks? ›

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”.

Will the US have CBDC? ›

Is the US Going to Digital Dollar? As of June 2024, the US Federal Reserve has not decided to transition to a CBDC or supplement its existing monetary system with one. It is researching the effects a CBDC would have on the dollar, the US, and the global economy.

What will happen if the US goes to digital currency? ›

Benefits of becoming a digital currency

There are certainly benefits to a digital dollar fully run and backed by the Fed. The money would be transferred almost instantaneously from bank accounts without having to wait days for the transactions to clear multiple financial institutions.

Will CBDC replace cash? ›

2. 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.

Which are the 9 banks for CBDC? ›

What are the banks that enabled CBDC-UPI interoperability to date?
  • Bank of Baroda (BoB)
  • Punjab National Bank (PNB)
  • Kotak Mahindra Bank.
  • HDFC Bank.
  • Yes Bank.
  • Axis Bank.
  • Union Bank of India.
Sep 9, 2023

Why do banks want CBDC? ›

The main purpose of CBDCs is to provide businesses and consumers conducting financial transactions with privacy, transferability, convenience, accessibility, and financial security.

Will credit unions be affected by CBDC? ›

The adoption of CBDC increased/change regulatory oversight for credit unions. The Federal Reserve will require credit unions to comply with new regulations and reporting requirements related to CBDC transactions. This results in increased compliance costs for credit unions.

Which banks are supported by CBDC? ›

India's Central Bank Digital Currency (CBDC), the Digital Rupee
Pilot BanksName of the App
HDFC BankHDFC Bank Digital Rupee
Union Bank of IndiaDigital Rupee By UBI
Bank of BarodaBank of Baroda Digital Rupee
Kotak Mahindra BankDigital Rupee by Kotak Bank
9 more rows

Will cash be phased out? ›

But while moving to a cashless society has several benefits that will accelerate its adoption, and there are legitimate concerns over the role cash will have to play as its use dwindles, there's no sign that cash is going to disappear completely.

What will replace the dollar? ›

But that begs a critical question: What would replace the dollar? Some say it will be the euro; others, perhaps the Japanese yen or China's renminbi. And some call for a new world reserve currency, possibly based on the IMF's Special Drawing Right or SDR, a reserve asset.

Are banks going cashless? ›

More than half of all bank branches no longer handle cash. Seven out of ten consumers say they can manage without cash, while half of all merchants expect to stop accepting cash by 2025 (Arvidsson, Hedman, and Segendorf 2018).

Is the United States going to a cashless society? ›

Progress of cashless initiatives in key countries

The US is moving toward cashless payments, with a substantial increase in the use of mobile wallet apps and contactless cards. A report from the Federal Reserve Bank of San Francisco found that payments made using cash accounted for just 18% of all US payments in 2022.

What should you own if the dollar collapses? ›

What To Own When the Dollar Collapses
  • Traditional Assets. ...
  • Gold, Silver, and Other Precious Metals. ...
  • Bitcoin and Other Cryptocurrencies. ...
  • Foreign Currencies. ...
  • Foreign Stocks and Mutual Funds. ...
  • Real Estate. ...
  • Food, Water, and Other Supplies. ...
  • Stability and Trust.
Dec 14, 2023

Should we get rid of paper money? ›

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.

Which banks are participating in CBDC? ›

India's Central Bank Digital Currency (CBDC), the Digital Rupee
Pilot BanksName of the App
SBIeRupee by SBI
ICICI BankDigital Rupee By ICICI Bank
IDFC First BankIDFC First Bank Digital Rupee
YES BANKYes Bank Digital Rupee
9 more rows

What is the future of Bank of America? ›

We are combining our industry-leading expertise with cutting-edge technology to build smart, forward-thinking solutions that enable us to continue leading the way in helping people live better financial lives, as well as companies and institutional investors improve their financial performance.

What banks will use digital currency? ›

The pilot will test how banks using digital dollar tokens in a common database can speed up payments. Participating banks include BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo.

Is Bank of America involved in cryptocurrency? ›

Bank of America's Merrill Lynch and Wells Fargo's brokerage division are offering wealth management clients access to exchange-traded funds tied to the spot price of bitcoin, highlighting the growing focus on cryptocurrency across the banking industry.

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