Central Banks Late to Digital Shift Risk Denting Currency Appeal

Central banks that do not introduce their own digital money will see demand for their currencies drop, according Bank of America Corp.

Central-bank digital currencies, or CBDCs, will provide a superior payment mechanism to cash, so much so that they may replace physical tender entirely in the distant future, according to a report by analysts at BofA Global research.

In some cases, countries without CBDCs could be “dollarized” as their citizens start using another country’s digital cash, and the value of their own currency could potentially drop sharply, analysts including Athanasios Vamvakidis wrote.

“For the U.S. dollar and the euro ...