ARK36 Exec Believes CBDCs Could Threaten Stablecoins
According to an industry executive, there is no threat of a central bank digital currency (CBDC) to cryptocurrencies, such as Bitcoins. However, there are risks involved in terms of stablecoins.
Private Crypto are not a Threat
ARK36’s executive director, MikkelMorchsaid that a decentralized or private cryptocurrency will not face any competition from a state-backed digital currency, such as the US dollar. The head of the digital asset hedge fund said that this was primarily because of the difference between the two’s value proposition and use cases.
He stated that decentralized digital assets are not just meant for conducting simple transactions. Earlier this year, Jerome Powell, the Chairman of the Federal Reserve, had hinted that they would not have a problem if a Fed digital dollar coexisted with a privately issued and well-regulated stablecoin.
According to Morch, just because countries have actively committed to the development of a CBDC does not mean that they are opposed to cryptocurrencies that are not backed by the state. He gave the example of Singapore in this scenario. In fact, the executive stated that blockchain technologies and cryptocurrencies may actually benefit from the rollout of a central bank digital currency (CBDC), as it would facilitate proliferation.
Stablecoins Could be a Risk
However, Morch was quick to add that there were risks involved where stablecoins are concerned. He stated that the introduction of a CBDC could significantly impact the demand and the role of stablecoins that are privately issued if there is already a market for these stablecoins. This was more applicable to the United States, as opposed to Singapore.
The remarks from Morch came in response to the statement of the central bank and financial regulator of Singapore. They pledged to take tough action if they find that the crypto industry exhibiting any ‘bad behavior’.
MAS Criticizes Private Crypto
The chief fintech officer of the Monetary Authority of Singapore (MAS), SopnenduMohantyhad shared his skepticism regarding the value private crypto can offer. He also asserted that the launch of a central bank digital currency (CBDC) could be expected in the next three years.
According to Morch, the statement of the MAS’s representative were a response to the recent events that have taken place in the crypto industry. They have caused a lot of doubts about the potential and value of cryptocurrencies. The failure of the Terra blockchain in the previous month, the potential insolvency of crypto hedge fund Three Arrows Capital (3AC) and the liquidity crisis of crypto lenders like Celsius Network and Babel Finance have wreaked havoc on market sentiments.
These comments from the MAS also make sense when you consider that 3AC is based in Singapore. Since there have been a lot of doubts about how the hedge fund handled the capital of its investors, it is not surprising that the financial authority in Singapore wants the sector to be regulated. After all, this can protect investors from being exposed to a great deal of risk that can create problems.
