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.

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”.

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.

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.

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.

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

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.

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.

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).

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.

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.

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.

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.

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.