Morgan Stanley: Bitcoin’s Astonishing Growth and CBDCs Pose a Threat to the US Dollar

by Jan 16, 2024CryptoNews0 comments

Morgan Stanley, a prominent Wall Street investment bank, has issued a warning that the increasing adoption of Bitcoin and the emergence of central bank digital currencies (CBDCs) could potentially challenge the dominance of the US dollar as the global reserve currency. In a recent investment note, Andrew Peel, Morgan Stanley’s head of digital assets, described this shift as a “paradigm shift” in the perception and utilization of digital assets. Peel pointed out that the recent approval of spot Bitcoin exchange-traded funds (ETFs) by the US Securities and Exchange Commission (SEC) has significantly accelerated this shift, with over $1.18 billion in weekly inflows into these new investment products.

Peel highlighted the remarkable growth of Bitcoin over the past 15 years as evidence of its global adoption, with approximately 106 million people worldwide currently holding the cryptocurrency. He also noted the presence of Bitcoin ATMs in more than 80 countries. Additionally, Peel emphasized that CBDCs from various countries could further impact the dominance of the US dollar, enabling faster cross-border payments without relying on a common currency. The Atlantic Council CBDC Tracker reveals that 130 countries, representing over 98% of global GDP, are actively exploring or developing CBDCs, indicating a significant increase compared to previous years.

130 countries are currently in the process of exploring a CBDC
130 countries are currently in the process of exploring a CBDC. Source: Atlantic Council

Furthermore, Peel acknowledged the potential for significant financial services innovation facilitated by CBDCs, such as the utilization of smart contracts for automated payments. While both Bitcoin and CBDCs have the potential to challenge the US dollar’s dominance, Peel suggested that stablecoins, which are largely fiat-pegged cryptocurrencies, could have a more substantial impact on global finance. He referred to stablecoins as crypto’s “killer app” and highlighted the increasing importance of dollar-backed stablecoins in reshaping cross-border money movement.

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The implications of Bitcoin’s growth and the rise of CBDCs have prompted Morgan Stanley to caution against complacency regarding the US dollar’s position as the global reserve currency. The evolving landscape of digital assets and the potential disruptions they may bring to the financial system necessitate careful attention and adaptation to maintain the dollar’s leadership.

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