Tipping Point Quick Hits (1.27.22)

Bank of America: A Digital U.S. Dollar is “Inevitable”

Late last week, economic analysts with Bank of America stated that they anticipate a digital version of the U.S. Dollar to be issued sometime between 2025 and 2030.

Nations like China and the Bahamas have been experimenting with central bank digital currencies (CBDCs) for a few years. But this is the first indication that the United States may be close on their heels:

“Our view remains that CBDCs are an inevitable evolution of today’s electronic currencies, although the report implies that the Fed has not committed to an eventual CBDC issuance and will not issue one without support from the executive branch and Congress,” BofA strategists Alkesh Shah and Andrew Moss wrote in a Jan. 24 report. “A US CBDC would differ from existing digital money available to the general public because it would be a liability of the Federal Reserve, not of a commercial bank, and would therefore have no credit or liquidity risk.”

Their statement comes in the wake of a discussion paper, published by the Federal Reserve, about the pros and cons of a potential US digital dollar. The paper does not favor a particular policy outcome. It only looks at how a CBDC could improve the safety and effectiveness of digital payments.