Major investment bank Morgan Stanley believes that central bank digital currencies do not threaten the existence of cryptocurrencies. The bank believes that both types of digital currencies can co-exist because they serve different purposes and have different appeal.
Cryptocurrencies and CBDCs can co-exist
Morgan Stanley’s analysts, including chief economist Chetan Ahya, discussed the impact of central bank digital currencies (CBDCs) on bitcoin and other cryptocurrencies in a report published last week. They wrote:
Cryptocurrencies will still exist as they continue to serve other use cases… For example, some cryptocurrencies can function as a storehouse of value… as some segments of the public do not place their full trust in fiat currencies.
The analysts explained that the uses and appeal of central bank digital currencies and cryptocurrencies are different. They added that cryptocurrencies can be both a store of value, similar to gold, and a speculative asset.
A growing number of people have said bitcoin is a store of value, including pro-bitcoin US Senator Cynthia Lummis and Federal Reserve Bank of Dallas President Rob Kaplan.
On why investors are increasingly interested in bitcoin and other cryptocurrencies, Morgan Stanley analysts described:
Investor interest in cryptocurrencies has risen alongside the unprecedented monetary and fiscal policy response to the pandemic.
Morgan Stanley, on the other hand, said in the report that government-backed digital currencies are likely to pose the greatest risk for stablecoins.
A growing number of central banks are increasingly interested in issuing their own digital currencies. The Bank of International Settlements (BIS) says 86% of the world’s central banks study digital currencies at different stages.
Morgan Stanley believes that CBDCs would be very different from cryptocurrencies as they are unlikely to use blockchains. The European Central Bank (ECB) has similarly said that CBDCs have little to do with cryptocurrencies, which the bank views as speculative assets and not real currencies.
Do you think cryptocurrencies and central bank digital currencies can co-exist? Let us know in the comments below.
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