Dollar Dominance May Wane Due to Digital Assets Surge: Morgan Stanley Warns
Summary:
Morgan Stanley warns that the growing prevalence and acceptance of digital assets like Bitcoin may challenge the global dominance of the U.S. dollar. The shift has been expedited by SEC's approval of Bitcoin ETFs in the U.S, with capital inflows exceeding $1.18 billion weekly. The consistent growth and global adoption of Bitcoin and the potential of CBDCs to enhance cross-border payments may further threaten the dollar's standing. The investment bank also underscores the transformative potential of stablecoins in global finance.
The pervasiveness and perception of digital currencies like Bitcoin (BTC) and central could pose a risk to the U.S. dollar's global supremacy, warns investment powerhouse Morgan Stanley. At present, the U.S. dollar accounts for nearly 60% of global foreign exchange reserves, however, a shift in the universe of digital assets could challenge the dollar's standing, as per Andrew Peel, Morgan Stanley's head of digital assets, in an investment note dated Jan. 12. The SEC's endorsement of multiple spot Bitcoin ETFs in America, as indicated by Peel, has expedited this shift, with weekly capital inflows into these platforms exceeding $1.18 billion. Also, the impressive worldwide adoption of Bitcoin over the last 15 years further substantiates its consistent growth, he adds, with around 106 million individuals globally owning the cryptocurrency and Bitcoin ATMs operating in over 80 nations. CBDCs from other countries too could affect the dollar's power by enabling swift international transactions without the requirement for a common currency like the U.S. dollar. The move towards CBDCs can effectively facilitate a unified standard for international payments, reducing dependency on traditional mediators such as SWIFT and prominent currencies like the dollar. Data from CBDC Tracker shows that 130 countries, comprising over 98% of global GDP, are currently investigating or developing CBDCs, marking a substantial growth from a few years ago. CBDCs, Peel pointed out, can spur substantial innovation in financial services such as the use of smart contracts for automated payments, effectively making programmable money a feasible concept. Acknowledging the potential impact of Bitcoin and CBDCs on the dominance of the U.S. dollar, Peel suggested that stablecoins could be a more constructive addition to global finance. He characterized stablecoins, predominantly backed by fiat currency, as the game changer of the crypto space, and stated, "The growing prominence of dollar-based stablecoins can significantly alter the financial sphere, likely transforming the process of cross-border money transfers." The news also covers Asia Express touching upon Hong Kong's Bitcoin ETF hysteria and Thailand's approval for a $14B airdrop.
Published At
1/16/2024 7:19:38 AM
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