Morgan Stanley: State digital money poses no threat to cryptocurrencies

Tyler Hromadka
E-Yuan: China’s developing digital currency. (Image: Aleksandra Sova / Shutterstock)

Morgan Stanley’s chief economist Chetan Ahya sees no competition in the digital currencies of the national central banks for crypto assets such as Bitcoin and others. The purposes of use are too different.

Chetan Ahya and his team of analysts at Morgan Stanley remain calm when it comes to the so-called CDBC (Central Bank Digital Currency), i.e. the digital currencies issued by central banks. This does not yet exist on a broad scale, but according to the Bank for International Settlements (BIS), 86 percent of central banks worldwide are already working on the implementation of corresponding concepts.

CDBC more like a means of payment, crypto more like an asset

In some countries around the world, above all in the People’s Republic of China, CBDC are already in the test phase. Pilot projects of various sizes are also running in Ukraine, Uruguay, Ecuador, Chile, Sweden and Korea. The widespread introduction is likely to drag on for a few years negative effect, according to the financial experts in a report published on Monday, reported by Business Insider.

Morgan Stanley justifies this assessment with the fact that CBDC and cryptocurrencies serve different purposes and have different incentives. CDBC were primarily used to receive and make payments – just as fiat currencies can.

Cryptocurrencies, on the other hand, are used more as a “store of value”, as an asset, and are not intended for daily payment transactions. Although this would be theoretically possible, it is a counterintuitive use case, especially because of the high volatility of cryptocurrencies.

Crypto currencies should not be seen as an alternative to real or digital fiat currencies, but rather as a method of protecting against their depreciation. Accordingly, investments in Bitcoin and Co are more like investments in securities.

CBDC no “kryptonite” for cryptocurrencies

This means that the assessment of the financial experts at Morgan Stanley differs from that of other financial institutions. Bank of America even called CDBC “Kryptonite” for cryptocurrencies. Kryptonite is a fictional metal that is used in the DC Comics about Superman to destroy the powers of the comic book hero.

Morgan Stanley sees the CBDC’s competition in so-called stablecoins, i.e. cryptocurrencies that are backed by real assets, as would be the case with the planned Facebook currency Diem (formerly Libra).

The European Central Bank positions itself similarly to Morgan Stanley. Even the guardians of the euro see speculative assets rather than means of payment in cryptocurrencies.

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