CBDCs are an unavoidable evolution of today’s electronic currencies, according to the bank’s analysts.

A US central bank digital currency (CBDC) would differ from the digital money currently available to the public in that it would be a liability of the US Federal Reserve, rather than a commercial bank, and thus would have no credit or liquidity risk, according to a report by Bank of America.

The benefits of a US digital currency include preserving the dollar’s status as the world’s reserve currency, improving cross-border payments, and increasing financial inclusion, according to analysts led by Alkesh Shah in a note released Monday. Last week, the Fed released a discussion paper on the benefits and risks of a CBDC in the United States.

Potential risks – which could be diminished by CBDC design choices – include “changing the financial sector’s market structure by shifting deposits, increasing the liquidity risk of the financial system if deposits at commercial banks were converted to a CBDC and decreasing the efficacy of monetary policy implementation,” the note said.

Bank of America said key considerations before issuing a CBDC are the need for it to be privacy-protected, intermediated, transferable and identity-verified.

In the absence of CBDCs, stablecoins are likely to see an increase in usage, according to the bank, which added that the two largest by market value, tether and USD coin, had a combined market value of around $121 billion as of Jan. 21. According to the report, their use as a means of payment is growing, particularly for cross-border remittances, because they are faster and less expensive than using fiat currency.

In a report released earlier this month, Bank of America questioned the Bank of England’s claim that a CBDC in the United Kingdom would only serve as a form of digital cash. According to the report, CBDCs are likely to replace checking accounts as the primary way for consumers to store their money.