According to a recent report by banking giant Morgan Stanely, despite central banks pushing the gas pedal in their race against decentralized technologies, it is very difficult for their CBDCs to really threaten cryptocurrencies. Analysts at Morgan Stanley believe that while CBDCs may affect cryptocurrency markets as they enter the space, they are unlikely to be a threat to decentralized technologies. Decentralized cryptocurrencies have other use cases that make them more appealing to investors and enthusiasts.
“CBDCs cannot compete against crypto in many aspects.”
According to statements by Morgan Stanley’s chief economist Chetan Ahya, the bank’s experts believe that decentralization has already permeated the mindset of many investors, and CBDCs cannot compete against crypto in many aspects precisely because of their decentralized and flexible nature. The chief economist said, “cryptocurrencies 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.” Many central banks globally are actively exploring the CBDC option.
It’s unlikely for cryptocurrencies to replace fiat.
As of now, Banks have mixed views regarding crypto. On the one hand, certain banks such as HSBC applied an anti-cryptocurrency policy (HSCBC started censoring certain transactions associated with digital tokens purchase and sale). On the other hand, banks like BNY Mellon announced services for cryptocurrency traders and hodlers, adapting to the new times. Morgan Stanley believes that the innovators will win out in the end. The report explains that current macroeconomic conditions have led to massive interest in cryptocurrencies. “Investors’ interest in cryptocurrencies has risen alongside the unprecedented monetary and fiscal policy response to the pandemic,” the report stated. The People’s Bank of China has conducted several successful digital yuan trials around the country and is getting close to issuing it to the general public.