Central bank digital currencies do not threaten the existence of cryptocurrencies, Morgan Stanley says

Central bank digital currencies do not threaten the existence of cryptocurrencies, Morgan Stanley says

Cryptocurrencies will continue to exist even if central banks start issuing their own digital currencies, because they serve different purposes and have different appeals, analysts at Morgan Stanley have said.

They said in a report on Monday government-backed digital currencies probably pose the biggest risk to stablecoins - that is, cryptocurrencies that reflect underlying assets, such as the one planned by Facebook.

But the analysts, including Morgan Stanley's chief economist Chetan Ahya, said "Cryptocurrencies will still exist, as they continue to serve other use cases.

"For instance, some cryptocurrencies can function as a store of value... as some segments of the public do not place their full faith in fiat currencies."

Some analysts have suggested CBDCs could cut the appeal of technologies such as bitcoin, with a Bank of America report saying they could be like "kryptonite" to crypto.

But Morgan Stanley's report said the reasons for investing in cryptocurrencies appeared to have evolved, with buyers increasingly viewing digital coins like bitcoin as new institutional asset classes, rather than replacement payment systems.

"Investors' interest in cryptocurrencies has risen alongside the unprecedented monetary and fiscal policy response to the pandemic," the report said.

Central bankers are increasingly interested in launching digital currencies. Research and development efforts are underway