Morgan Stanley says CBDCs are not a threat to cryptocurrencies

Leading investment bank Morgan Stanley believes central bank digital currencies pose no threat to cryptocurrency existence. The bank believes that both types of digital currencies can coexist because they serve different purposes and have different attractions.

Cryptocurrencies and CBDCs can coexist

Morgan Stanley analysts, including chief economist Chetan Ahya, discussed the impact of central bank digital currencies (CBDCs) on bitcoin and other cryptocurrencies in a report released last week. Here is what was written:

"Cryptocurrencies will still exist, as they continue to serve other use cases ... For example, some cryptocurrencies can function as a store of value ... as some segments of the public do not place their full trust in fiat currencies."

Analysts explained that the uses and appeals of digital currencies and central bank 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 Dallas Federal Reserve Bank President Rob Kaplan.

As for why investors are increasingly interested in bitcoin and other cryptocurrencies, analysts at Morgan Stanley said:

"Investor interest in cryptocurrencies has increased in parallel with the unprecedented monetary and fiscal policy response to the pandemic."

Conversely, Morgan Stanley said in the report that government-backed digital currencies likely pose the greatest risk to stablecoins.

An increasing number of central banks are interested in issuing their own digital currencies. The Bank for International Settlements (BIS) says 86% of the world's central banks are studying digital currencies at different stages.

Morgan Stanley believes CBDCs would be very different from cryptocurrencies, as they are unlikely to use the blockchain. Similarly, the European Central Bank (the ECB) said CBDCs have little to do with cryptocurrencies, which the bank sees as speculative assets and not real currencies.

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It is clear that at this point the CBDCs will arrive, but will they really not affect the domain of private cryptocurrencies? We'll see. In the meantime, we would like to ask you what do you think about the fact that cryptocurrencies and central bank digital currencies can coexist? Let us know what you think in the comments section below.