CBDC may threaten stablecoins, not Bitcoin: ARK36 exec

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Central bank digital currencies (CBDCs) do not pose any direct threat to cryptocurrencies such as Bitcoin (BTC), but are still associated with risks associated with stable coins, according to one industry chief executive.

According to Mikkel Morch, executive director of the ARK36 digital asset protection fund, a state-backed digital currency such as the U.S. dollar does not necessarily have to compete with private or decentralized cryptocurrency.

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

The executive cited Federal Reserve President Jerome Powell, who hinted earlier this year that the U.S. government would not prevent a “well-regulated, privately issued stablecoin” from coexisting with the Fed’s potential digital dollar.

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

However, the concept of CBDC is still associated with some risks in terms of stable coins, Morch noted, noting:

“Admittedly, the CBDC can reduce the role and demand for privately issued stablecoins provided the country already has a market for stable coins – which is more the case in the US than in Singapore.”
Morch’s remarks came in response to a promise by Singapore’s financial regulator and central bank to be “brutally and uncompromisingly strict” toward any “bad behavior” by the cryptocurrency industry.

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

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

Related: Stablecoins highlight the ‘structural fragility’ of cryptocurrencies – the Federal Reserve

Morch specifically suggested that MAS’s comments on the brutality make a lot more sense if one considers that Three Arrows Capital, also known as 3AC, is a Singapore-based company. “If half of the rumors about how the fund managed its clients’ capital are true, it’s no wonder Singapore’s financial authorities see a need for greater regulation in the area, ”he added.

Source: CoinTelegraph

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