central bank digital currencies would accentuate inflation

In an unpublished report, Bank of America considers that the distribution of central bank digital currencies (CBDC) to stimulate the economy, can aggravate inflation in the countries where these measures are applied.

Artificial stimuli to the fiduciary economy have been quite frequent since last year, given the crisis caused by the Covid-19 pandemic, the destruction of jobs, the closure of businesses and therefore, the impact of world markets.

With the approach of central banks to national digital currencies, as a solution to the shortage of physical money in cash and the need to bring the economy to electronic platforms, users may worry about the operation of monetary policies in this respect.

The Bank of America report, compiled by outlets such as Nasdaq, is titled Digital Love: Central Bank Digital Currencies, indicates that CBDCs could be easily transferable to their creditors, as well as facilitate transactions. digital nationally and internationally.

However, for this very reason, inflation expectations could boost demand for cryptocurrencies as a safeguard of value. The report does not mention bitcoin (BTC) or other cryptocurrencies, but it does point to the ability that states would have to distribute CBDC, creating conditions that bring monetary inflation as a consequence.

“The disruption of cryptocurrencies is pushing central banks to ensure their dominant role in the management and execution of payments, and their ability to supervise other banks and direct monetary policies,” said the Bank of America.

CBDCs represent the next frontier for central bank stimuli, being functional to measures such as stimulus checks, emergency loan programs, Universal Basic Salary (UBI), or inducing money drops (distribution of money) more and more powerful. The evolution of central bank digital currencies may increase inflation expectations, boosting inflationary assets in the 2020s.

Bank of America.

The report also considers the risks to the privacy of users, since governments could have access to information on people’s financial activity.

This problem was addressed by CriptoNoticias in an article about the UBI (Universal Basic Income) project of the Democracy Earth organization, which although it is not a central government body, does carry similar risks.

Various governments of the world are preparing to issue their digital currencies, being in different stages of research and development. The most advanced in this regard is China, which has already carried out several tests and has even launched a digital wallet for the digital version of its currency.

Likewise, countries such as the Bahamas, Sweden and the United States also have similar initiatives, but the world’s first national digital currency has yet to be issued.