Central banks representing two-thirds of the world's nations and 98% of the global GDP are currently exploring the development of CBDCs, Coindesk reported, citing Bank of America.
But a digital dollar? Don't expect one anytime soon.
What Happened: "The Federal Reserve (Fed) continues to pilot CBDCs but has not committed to a CBDC and will not issue one without executive branch and Congressional support," state analysts, including Alkesh Shah.
The Fed's approach remains cautious, awaiting broader governmental backing before proceeding with a digital currency issuance.
Proponents say CBDCs can streamline cross-border and domestic payment systems, aid in monetary policy implementation, and enhance financial inclusivity.
"CBDC benefits and risks depend on the design and issuance approach, but we expect CBDCs to provide a more efficient and less costly payment system for cross-border and domestic payments, a tool for monetary policy implementation and improved financial inclusion," the authors note.
Analysts also caution about potential downsides, including intensified competition with bank deposits, increased instances of bank runs, loss of monetary sovereignty, and international tensions.
Why It Matters: The innovation in digital assets, as per the Bank of America report, is likely to be driven by central banks and governments, utilizing private sector resources.
This collaboration is anticipated to be beneficial throughout all stages of CBDC implementation.
Bank of America maintains a positive outlook on the transformative potential of CBDCs in the global financial landscape, stating that they have the "potential to revolutionize global financial systems."
Separately, the Swiss National Bank (SNB) announced a collaboration with the SIX Digital Exchange (SDX) and six commercial banks to pilot a wholesale CBDC, further indicating the growing global interest in digital currencies.