Central Bank Digital Currencies (CBDCs), or digital currencies distributed and managed by the state, do not pose a threat to decentralized assets such as Bitcoin
News • According to an industry executive, Central Bank Digital Currency (CBDC) does not pose a direct threat to cryptocurrencies like Bitcoin (BTC), but could realistically harm stablecoins. According to Mikkel Morch, executive director of the ARK36 digital asset fund, a state-owned digital currency would not necessarily compete with private and decentralized cryptocurrencies. That's because the value proposition and use cases of decentralized digital assets "often go beyond the realm of simple transactions," Morch explained. In this regard, the executive quoted the words of Jerome Powell, who earlier this year made it clear that the US government would not prevent "a well-regulated and privately issued stablecoin" from coexisting with a potential digital dollar managed by the Fed. Therefore, Morch continued, nations active in the development of their own CBDCs are not necessarily hostile to decentralized cryptocurrencies. In contrast, launching a CBDC could even "promote the proliferation of non-sovereign cryptocurrencies and blockchain technologies." However, demand for third-party stablecoins may decrease: "CBDCs could decrease the role and demand for privately issued stablecoins, provided there is already a market for stablecoins in the country: this applies more to the United States than to Singapore." Morch's remarks come in response to the words of Singapore's regulator, which will pledge to regulate in an "incredibly harsh and brutal" manner any "bad behavior" in the cryptocurrency industry. On June 23, Sopnendu Mohanty, Chief Fintech Officer of the Monetary Authority of Singapore (MAS), expressed skepticism about the value of private cryptocurrencies. He also revealed that we will most likely see the launch of a state alternative within the next three years. Mohanty made such comments after the dramatic events that occurred recently in the cryptocurrency industry: the collapse of the Earth ecosystem, the liquidity crisis of the Celsius lending platform and the insolvency of Three Arrows Capital. Related: Stablecoins Highlight 'Structural Fragilities' of Cryptocurrencies, Federal Reserve Argues The desire of the Monetary Authority of Singapore to regulate cryptocurrencies, Morch explained, is entirely logical when you consider that Three Arrows Capital is based in Singapore: "If half of the rumors about how the fund has managed its clients' capital are true, it's no wonder that Singapore's financial authority considers more regulation of this industry necessary."