Digital currencies and stablecoins represent a natural evolution and are the “future of money and payments,” according to a new research report from Bank of America (BAC).
In the report, Bank of America analyst Alkesh Shah writes that central bank digital currencies have “the potential to revolutionize global financial systems and may be the most significant technological advancement in the history of money.”
Central bank digital currencies use blockchain technology to increase efficiency and lower costs. A stablecoin is a type of cryptocurrency whose value is pegged to another asset, typically the U.S. dollar or the price of gold.
The benefits and risks of central bank digital currencies depends on their design and framework, but Bank of America expects central banks in developing nations to increasingly adopt digital currencies as they focus on payment efficiencies.
Of course, central bank digital currencies come with plenty of risks. They can lead to competition with bank deposits and may lead to a loss of monetary sovereignty and inequality among countries, says Bank of America in its report.
Widespread adoption of central bank digital currencies is not likely to happen for over a decade in some countries, but central banks are expected to “adopt technological advances or risk irrelevance over the longer term,” says Bank of America.
Bank of America is the second biggest lender in the U.S. Its stock price has declined 27% over the last year to $33.23 U.S. per share.
