Crypto Threatened by CBDCs?
Whale investment bank Morgan Stanley announces that central bank digital currencies are not a threat to the era of crypto currencies. The bank believes that both types of digital assets can coexist because they have different purposes and have different appeals.
Morgan Stanley’s analysts, in addition to chief economist Chetan Ahya, weighed in on the impact of central bank digital currencies (CBDCs) on bitcoin and other cryptos in a report published last week. They stated:
Crypto currencies will still exist, as they continue to serve other use cases … For instance, some cryptocurrencies can function as a store of value … as some segments of the public do not place their full faith in fiat currencies.
Want to learn more about Value investing and add another skillset to your trading arsenal? Check out the Book “The Intelligent Investor”. You can get your copy here.
Comparing Usage and Appeals
Analysts described that the uses and appeals of central bank digital currencies and crypto currencies are much different from one another. They added that crypto currencies can be used both as a means to store value, similar to gold, as well as a speculative asset.
A growing number of individuals have also stated that bitcoin is a store of value, including pro-bitcoin U.S. Senator Cynthia Lummis and the Federal Reserve Bank of Dallas President Rob Kaplan. To understand why investors are increasingly interested in bitcoin and other cryptocurrencies, the Morgan Stanley analysts stated:
Investors’ interest in cryptocurrencies has risen alongside the unprecedented monetary and fiscal policy response to the pandemic.
In comparison, Morgan Stanley said in the announcement that government-backed digital currencies likely pose the largest risk to stable coins.
An increasing amount of central banks are more and more interested in issuing their own digital currencies. The Bank of International Settlements (BIS) announced that 86% of the world’s central banks are looking into creating digital currencies in varying stages.
Morgan Stanley anticipates that CBDCs would be much different from cryptocurrencies as they are less likely to incorporate blockchains. The European Central Bank (ECB) has also said that CBDCs have little to do with cryptocurrencies, which the bank would believe to be more speculative assets and not actual currencies.