A fresh crypto report basically on the subject of Central Bank Digital Currencies (CBDCs) has been published by the Bank of America (BOA) comprising over a thorough study regarding the CBDCs. The publication reveals that in the view of BOA there is huge potential and benefit in the usage of CBDCs if they are adopted and incorporated by countries that are under the developing phase. The report discusses the benefits of CBDCs adoption which would include a huge reduction in the processing costs of transactions and the creation of further and better economic activities for developing countries.
While it is certain that Federal Reserve may not agree to the findings published in the BOA’s recent report yet they have weight. The recent report of BOA is regarding the CBDCs and discusses the use of CBDCs by the countries which are categorized as “developing countries”. It was revealed in the report that CBDC’s adoption by any developing country will result in the boosting of the national economy. At the same time, the developing country would also be able to ensure further growth of the economy to a great extent. However, the AOB’s report also took note that the adoption would also likely give rise to inflation as well as dollarization.
There was another report which too was of BOA but authored by BOA’s head of EMEA, David Hauner, in his official capacity. Hauner concludes that CBDCs are capable of playing a crucial role in economies where 50% population does not own any bank account. He explained that there are certain financial constraints in a poor economy that can only be addressed through the use of CBDCs. In addition, when these financial constraints will be identified, continuous use of CBDC will ensure their elimination from the roots.
The report also talked about the most positive aspect of the CBDC i.e. cost-cutting during the process of execution of transactions. The findings contained in the report suggest that non-legal activities such as corruption etc. can be taken down through the use of CBDCs.
It was further concluded in the report that however, the use of CBDC could potentially be non-favorable for the national currency. This is so because there is a chance that both currencies enter into the competition. In this situation, it is likely that either CBDC could overpower national currency or that the national currency could undermine CBDC. There is an equal opportunity for both currencies to instigate huge volatility in between them individually.
According to Hauner, central banks of the world may be issuing their individual proposals for CBDC between 2023 to 2025. In the meantime, there is news suggesting that some countries in the African region are in the final stages of their CBDC projects.