© Reuters
Investing.com – According to a research report compiled by analysts at Bank of America (NYSE:) last week, CBDCs, or central bank digital currencies (aka “crypto” versions) fiat currencies) could “revolutionize global financial systems”.
“Digital currencies seem inevitable”, can we read in particular in the research report, which adds:
“We see distributed ledgers and digital currencies, like CBDCs and stablecoins, as a natural evolution of current monetary and payment systems.”
The report indeed explains that current cross-border payments are inefficient:
“Cross-border payments are routed through an average of 2.6 different correspondent banks, which increases settlement time”, notes the report, stating that “20% of cross-border payments denominated in euros require the intervention of 5+ banks corresponding.”
The consequence is that international transfers can sometimes cost 10 times more than national transfers.
Analysts also pointed out that CBDCs would allow better access to banking services for isolated or disadvantaged populations.
“A CBDC accessible to those with a bank account and a smartphone would increase the banked population from 93.5% of households to 96.7% in the United States,” the report states, adding that “by removing the need for a smartphone, the banked population would rise to 98%.
The report also identified potentially problematic competition between CBDC futures and stablecoins, cryptocurrencies backed by traditional currencies.
“The proliferation of stablecoins for cross-border and domestic payments and transfers could inhibit a central bank’s ability to implement monetary policy if growth remains unchecked and unregulated, as well as increase systemic risk,” which explains that “Loss of monetary control could result in inflation significantly above current central bank targets.”
Thus, BofA analysts “expect the adoption and use of stablecoins for payments to grow in the absence of CBDCs, as financial institutions explore asset custodial and trading solutions. digital.”
Finally, they pointed out that “the design and programmability of CBDCs will likely determine the level of adoption and future use of stablecoins”, explaining more precisely that “the ability of CBDCs to supplant stablecoins depends largely on the interoperability of the first with blockchains and blockchain-based applications.”