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One industry expert argues that central bank digital currencies (CBDCs) may not constitute a direct threat to cryptocurrencies like Bitcoin (BTC) but are nonetheless connected with dangers concerning stablecoins.
According to Mikkel Morch, executive director of the digital asset hedge firm ARK36, a state-backed digital currency such as the U.S. dollar need not compete with a private or decentralized cryptocurrency.
This is since the use cases, and value proposition of decentralized digital assets "often go beyond the realm of simple transactions," Morch told Cointelegraph on Thursday. The executive referred to Federal Reserve Chair Jerome Powell, who implied that the U.S. government would not prevent a "well-regulated, privately issued stablecoin" from coexisting with a possible Fed digital currency earlier this year.
Thus, according to Morch, an active commitment to CBDC development does not imply that other nations, like Singapore, are hostile to non-state-backed cryptocurrencies. The CEO indicated that implementing CBDC may potentially “promote the spread of non-sovereign cryptocurrencies and blockchain technology.”
Morch stated that the notion of a CBDC is still related to some dangers about stablecoins. “Admittedly, though, a CBDC may diminish the role of and the demand for privately issued stablecoins provided that there is a market for stablecoins already in the country — which is more the case in the U.S. than it is in Singapore.”
In reaction to Singapore’s financial regulator and central bank vowing to be “brutal and unrelentingly tough” on any “bad behavior” from the cryptocurrency business, Morch made his statements.
Sopnendu Mohanty, the top technology officer of Singapore’s Monetary Authority (MAS), voiced considerable pessimism over the value of private cryptocurrencies on June 23. He also predicted that a state-backed alternative would be introduced within three years.
ARK36’s Morch also connected Mohanty’s current views to the recent dramatic events in the crypto business, including the failure of the Terra ecosystem last month, the liquidity problem of the Celsius crypto lending platform, and the insolvency of Three Arrows Capital.
Considering that Three Arrows Capital, commonly known as 3AC, is a Singapore-based company, according to Morch, makes the MAS’s remarks about turning ruthless considerably more comprehensible. “If half of the rumors about how the fund handled the capital of its customers are true, there is little wonder that Singapore’s financial authority sees the need for more regulation in the space,” he said.
