Bitcoin, Stablecoin, And CBDC Threaten US Dollar Domination

Bitcoin cs and CBDC are said to be threats to the US dollar. (Photo; Doc. CryptoNoticias)

JAKARTA - Bitcoin and CBDC (Central Bank Digital Currency) are two forms of digital assets that are increasingly popular in the world. However, do they have the potential to overthrow the position of the US dollar as currency dominating world finances? This is also a concern of Andrew Peel, Head of Digital Assets at the leading financial services institution, Morgan Stanley.

In an investment note on Friday, January 14, 2024, Peel highlighted "pardigma shift in global perceptions and the use of digital assets" as a threat to the dollar. The report notes that the last 15 years of Bitcoin existence has witnessed the growth of global adoption at an "extraordinary" level. There are currently 106 million people who own Bitcoin, with Bitcoin ATM machines available to its holders in more than 80 countries.

In addition to increasing popularity and adoption of cryptocurrencies, Pepel noted recent approval of the Bitcoin Spot ETF by the United States Securities and Exchange Commission (SEC). The report states that this is a factor that supports the growth and adoption of cryptocurrencies and potentially threatens the existence of the dollar. The Bitcoin ETF allows investors to buy and sell Bitcoin on the stock exchange without having to own Bitcoin directly.

Then, Pepel also mentioned the central bank digital currency aka CBDC which in recent years has attracted various countries to issue its own CBDC. For your information only, CBDC is a digital currency issued and regulated by the central bank.

CBDC is designed to mimic the characteristics of fiat currencies, such as stable and well-known exchange rates. CBDC can also take advantage of the same technology used by cryptocurrencies, namely blockchain. This technology is used to increase efficiency, transparency, and innovation.

To date, more than 100 countries have launched CBDCs or are currently working on it. According to the CBDC Tracker Atlantic Council, only 35 countries are considering CBDCs in May 2020. Now, 130 countries, 98% of the world's GDP, are exploring a digital version of their national currency. The tracker shows that 11 countries have launched CBDCs, while 21 and 33 are in the testing and development stages, respectively. In addition, there are currently 46 countries in the research phase.

CBDC has the potential to become a shared standard for cross-border payment systems such as cryptocurrencies, CBDCs are also claimed to reduce user dependence on traditional intermediaries such as SWIFT and the use of dominant currencies such as dollars.

"[CBDC] has the potential to set common standards for cross-border payments, which can reduce dependence on traditional intermediaries such as SWIFT and the use of dominant currencies such as dollars..." Pee wrote.

Not only that, he also discussed stablecoins, crypto assets that have stable value because their value is pegged to fiat prices such as dollars. With increasing interests, dollar-backed stablecoins are likely to have a deep impact on the financial sector, potentially changing the way money is moved across borders," he added.

Stablecoins are a type of cryptocurrency whose value is tied to other assets, such as fiat or gold currencies, to reduce price volatility. Dollar-backed stablecoins, such as Tether (USDT) or USD Coin (USDC), are the most widely used stablecoins in the crypto market.