CBDC may threat stablecoins, not Bitcoin: ARK36 exec


Central bank digital currencies (CBDC) do not pose any direct threat to cryptocurrencies like Bitcoin (BTC), but are still associated with risks relative to stable currencies, according to one industry executive.

According to Mikkel Morch, executive director at the hedge fund of digital assets ARK36, a state-owned digital currency like the U.S. dollar does not necessarily have to be a competitor to a private or decentralized cryptocurrency.

That’s because the use cases and value proposition of the decentralized digital assets “often go beyond the realm of simple transactions,” Morch said in a statement to Cointelegraph on Thursday.

The execution referred to Federal Reserve Chairman Jerome Powell, who earlier this year alluded to that the U.S. government would not stop a “well-regulated, privately issued stable” from coexisting with a possible digital dollar from the Fed.

As such, an active commitment to the CBDC development does not mean that other countries like Singapore are hostile to non-state cryptocurrencies, Morch said. The executive suggested that launching a CBDC could even “facilitate the proliferation of non-sovereign cryptocurrencies and blockchain technologies.”

However, the concept of CBDC still relates to some risks in relation to stable currencies, Morch noted, stating:

“Admittedly, however, CBDC may diminish the role and demand for privately issued stable coins provided there is a market for stable coins already in the country – which is happening more in the United States than in Singapore.”

Morch’s remarks came in response to the financial regulator and central bank of Singapore promising to be “brutal and constantly tough” about any “bad behavior” of the cryptocurrency industry.

On June 23, the chief fintech officer of Singapore’s Monetary Authority (MAS) Sopnendu Mohanty expressed a lot of skepticism about the value of private cryptocurrencies. He also said he expected a state-backed alternative to be launched within three years.

ARK36’s Morch also linked Mohanty’s latest comments with the recent dramatic events in the crypto industry, including the failure of the Terra ecosystem last month, the liquidity crisis of the Celsius crypto loan platform and the insolvency of Three Arrows Capital.

Related: Stablecoins highlight ‘structural weaknesses’ of crypto – Federal Reserve

Morch specifically suggested that MAS’s comments about going brutal make a lot more sense if one considers that Three Arrows Capital, also called 3AC, is a Singapore company. “If half of the rumors about how the fund has handled its clients’ capital are true, it is not surprising that Singapore’s financial authority sees the need for more regulation in the space, ”he added.