Morgan Stanley Crypto Expert Outlines How Bitcoin, CBDCs Threaten US Dollar Supremacy

Morgan Stanley MS issued a warning about the potential decline in the global dominance of the U.S. dollar.

The investment bank attributed this decline to the rising influence of digital assets like Bitcoin BTC/USD and various central bank digital currencies (CBDCs).

Andrew Peel, Morgan Stanley's head of digital assets, highlighted in an investment note dated Jan. 12, that the U.S. dollar — currently accounting for about 60% of global foreign exchange reserves — faces a challenge due to a significant shift in how digital assets are perceived and utilized globally.

Peel emphasized that this change is being propelled forward by the recent approval of several spot Bitcoin exchange-traded funds in the U.S. by the Securities and Exchange Commission (SEC).

He pointed out that these new products have already seen substantial weekly inflows, exceeding $1.18 billion.

Peel also referenced Bitcoin's impressive global adoption over the last 15 years as a sign of its ongoing growth.

He noted that around 106 million people worldwide now own Bitcoin and the presence of Bitcoin ATMs in over 80 countries further evidences its expanding reach.

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De-Dollarization Through CBDCs: The rise of CBDCs in various countries poses another potential threat to the dollar's supremacy, according to Peel.

He explained that CBDCs could facilitate rapid cross-border payments without relying on a common currency like the dollar.

Peel said, "(CBDCs) hold the potential to establish a unified standard for cross-border payments, which could diminish the reliance on traditional intermediaries like SWIFT and the use of dominant currencies such as the dollar."

Peel further discussed the innovative possibilities offered by CBDCs, such as the implementation of smart contracts to automate payments, bringing the idea of programmable money closer to reality.

Stablecoins — Crypto's 'Killer App?': While acknowledging the impact of Bitcoin and CBDCs on the U.S. dollar's dominance, Peel also pointed out the potential benefits of stablecoins in global finance.

He described these largely fiat-pegged digital currencies as the "killer app" of the crypto world.

Peel elaborated, "With their increasing importance, dollar-backed stablecoins are set to have a profound impact on the financial sector, potentially reshaping how money is moved across borders."

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