BofA: Don’t Tarnish Blockchain Technology With Speculative Crypto Trading

The development of applications leveraging distributed ledger and blockchain technology continues to advance, the bank's report said.

AccessTimeIconNov 18, 2022 at 12:34 p.m. UTC
Updated May 9, 2023 at 4:03 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

It is important to separate speculative crypto trading and token prices from the underlying blockchain technology, Bank of America (BAC) said in a research report Thursday after a group of major banks and the Federal Reserve Bank of New York started testing the use of digital tokens representing dollars.

Citigroup (C), HSBC (HSBC), BNY Mellon (BK) and Wells Fargo (WFC) are among those taking part, as is payments giant Mastercard (MA), the New York Fed said on Tuesday.

Despite the backlash following the collapse of crypto exchange FTX and its sister company Alameda Research, “the development of applications that leverage distributed ledger and blockchain technology continues to advance,” analysts Alkesh Shah and Andrew Moss wrote.

The benefits of a wholesale central bank digital currency (CBDC) include faster settlement time, which could allow financial institutions to reallocate funds that had been otherwise held as collateral into yield-bearing investments, the bank said. Other positives include reduced costs, lower credit risk and increased transparency.

Bank of America says a wholesale CBDC may be issued before a retail CBDC “due to less complexity related to design, privacy and banking system disintermediation.”

Central banks and governments are expected to drive digital asset innovation by leveraging the private sector, the note said, and this will create new revenue streams. Governments may give contracts to payments and consulting firms for their expertise, but the larger revenue opportunity likely exists for “infrastructure providers that offer distributed ledger platforms, cloud storage, cybersecurity, digital asset custody/wallets and telecom for offline access.”

Potential beneficiaries will depend on what type of CBDC implementation approach is used, according to the report.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.

Author placeholder image

Will Canny is CoinDesk's finance reporter.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.