According to an executive of ARK36, central bank digital currencies (CBDC) may not directly threaten cryptocurrencies like Bitcoin (BTC), but they cause dangers when it comes to stablecoins.
A state-backed digital currency like the U.S. dollar doesn’t necessarily have to be a rival to a private or decentralized cryptocurrency, according to Mikkel Morch, executive director of the digital asset hedge fund ARK36.
This is so because, according to a statement provided by Morch to Cointelegraph on Thursday, the use cases and value proposition of decentralized digital assets “frequently transcend beyond the domain of simple transactions.”
The executive cited Federal Reserve Chair Jerome Powell, who had earlier this year said that the US government would not prevent the coexistence of a “properly regulated, privately issued stablecoin” with a possible Fed digital currency.
As a result, active support for CBDC development does not imply that other nations, like Singapore, are hostile to non-state-backed cryptocurrencies, according to Morch.
A CBDC roll-out, according to the executive, “could even facilitate the proliferation of non-sovereign cryptocurrencies and blockchain technologies.”
Morch stated that the idea of a CBDC is still connected to some dangers in relation to stablecoins, adding:
“Admittedly, though, a CBDC may diminish the role of and the demand for privately issued stablecoins provided that there is a market for stablecoins already in the country – which is more the case in the U.S. than it is in Singapore.”
Morch responded to the central bank and financial regulator of Singapore’s promise to be “brutal and unrelentingly severe” on any “bad behavior” from the cryptocurrency sector.
Sopnendu Mohanty, the top fintech officer of Singapore’s Monetary Authority (MAS), expressed considerable doubt over the worth of personal cryptocurrencies on June 23. In addition, he predicted that a state-backed substitute would be introduced in three years.
The recent dramatic developments in the cryptocurrency business, such as the collapse of the Terra ecosystem last month, the liquidity problem of the Celsius crypto lending platform, and the bankruptcy of Three Arrows Capital, were also linked by ARK36’s Morch to Mohanty’s most recent remarks.
Morch specifically highlighted that if one considers the fact that Three Arrows Capital, better known as 3AC, is a Singapore-based company, the MAS statements on going ruthless make a lot more sense.
“It is not surprising that Singapore’s financial regulator recognizes the need for further regulation in the industry if half of the reports about how the fund handled its customers’ capital are accurate,” he continued.
