According to CoinDesk, central bank digital currencies (CBDCs) are on the horizon, but a digital dollar is not expected in the near future, according to a Bank of America report released on Monday. The report states that central banks representing 67% of countries worldwide and 98% of global GDP are exploring CBDCs, with 33% of them in advanced stages. A CBDC is a digital currency issued by a government, typically a tokenized form of the country's fiat currency.
The Federal Reserve 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. The report highlights that CBDC benefits and risks depend on the design and issuance approach, but CBDCs are expected 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. However, they may also drive competition with bank deposits, more frequent bank runs, loss of monetary sovereignty, and tensions among countries globally. Central banks and governments are anticipated to drive digital asset innovation by leveraging the private sector and beneficiaries to emerge across all phases of CBDC implementation. Bank of America maintains its view that CBDCs have the potential to revolutionize global financial systems. The Swiss National Bank announced earlier this month that it is working on a wholesale CBDC pilot alongside the SIX Digital Exchange and six commercial banks.