Topline

Booming institutional adoption has lifted the world’s largest cryptocurrency to meteoric new highs this year, but bitcoin’s underlying technology has also piqued the interest of central banks looking to forge their own digital currencies–a move that Bank of America warned Wednesday is bad news for the cryptocurrency market.

Key Facts

A growing number of central banks (about 86%, according to the Bank for International Settlements) are actively exploring the development of central bank digital currencies, or CBDCs, in an effort to “defend their territory from cryptocurrencies,” Bank of America analysts said in a Wednesday note to clients.

CBDCs effectively combine the efficiency of cryptocurrency transactions with the safeguards of a central-bank-backed asset (like cash), and though “highly radical,” their implementation would also make it easier for governments to implement the monetary policy measures that have helped keep the economy afloat during
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