In a recent Morgan Stanley report, the bank’s analysts explicitly argue that cryptocurrencies will continue to exist even if central banks issue their own digital currencies.
The differences between CBDCs and cryptocurrencies for Morgan Stanley
In particular, they see some cryptocurrencies as more akin to store of value, similar to gold, and other speculative assets, rather than as means of exchange for payments like fiat currencies issued by central banks.
Therefore, having different purposes than CBDCs, even when central banks issue their own digital currencies, they will not be able to compete with cryptocurrencies.
The only ones that might be at risk are stablecoins, which are not true cryptocurrencies, but tokens representing other, more stable assets. Among these, Morgan Stanley analysts include the Facebook stablecoin Diem, formerly Libra.
Recently, other analysts, such as those at Bank of America, had argued that CBDCs could reduce the attractiveness of technologies such as Bitcoin, so much so that they could be like ‘kryptonite’ for cryptocurrencies. However, this other analysis appeared to be too superficial to match reality.
Morgan Stanley’s report also states that the reasons for investing in cryptocurrencies seem to have evolved over time, with many investors increasingly seeing bitcoin as a new institutional asset class, rather than a replacement payment system.
Another relevant point in this analysis is the highlighting of the increase in investor interest in cryptocurrencies in parallel with the “unprecedented monetary and fiscal policy response to the pandemic”.
Lastly, a key difference between CBDCs and cryptocurrencies is highlighted, as central bank digital currencies will not be based on a decentralized security system, or blockchain.