According to an analyst at Morgan Stanley, an investment bank, the United States has to issue a CBDC to guarantee that the dollar maintains its position as the world’s primary payment tool.
Regulation Of Crypto Dollars
In an analysis report published in March, Morgan Stanley stated that the United States Treasury and Congress department are preparing regulations for crypto dollars or stablecoin issuers, which could result in these entities being regulated the same way banks are currently regulated. This is because a CBDC shares the same value as a fiat currency and is neither lower nor higher in value than it. Firms that issue stablecoins have to be regulated to ensure that more stablecoins that would saturate the economy are not released at once.
A presidential executive order on the fate of virtual assets was recently signed by President Biden, with a particular emphasis on the investigation of a possible CBDC (Central Bank Digital Currency) in the country. The United States administration recognizes the threat posed by foreign CBDCs in the Eurozone and China.
According to a report by a team of analysts headed by Sheena Shah, it recognizes why they have to respond with the utmost urgency “for the American dollar to continue to stand as the preferred and popular payment system” according to a report by a team of analysts headed by Sheena Shah. The Chinese digital Yuan is currently the most used CBDC as the electronic currency has spread operation and usage to 13 states.
Are Stablecoins Derivatives, Securities, or Commodities?
According to the memo, the administration views the regulation of cryptocurrency space as a way to mitigate the effect of cryptocurrencies on the supremacy of the American dollar in finance. It is possible that the repercussions for the cryptocurrency market may be widespread since around 60% of BTC and ETH transactions are trades against a stabilized currency, and lending of stablecoin is now an essential aspect of both centralized and decentralized finance (DeFi).
DeFi refers to an umbrella word that relates to trading, lending, and financial operations that are conducted on the blockchain but without the involvement of a third party or mediator. Because stablecoins are not broadly used for consumer and business transactions, Morgan Stanley says a regulatory uncertainty still exists around the topic of whether stablecoins are derivatives, securities, or commodities.
According to the report, if the United States government is determined to create a consumer CBDC, it may possibly disrupt the business strategies of banks and financial businesses and reduce the amount on charges. The US has not yet released a date for the issuance of a CBDC though the country is currently working on a cryptocurrency regulatory framework. The Corporate bank anticipates that movement on new cryptocurrency legislation in the United States will be gradual, especially in the run-up to the November midterm elections.