A “paradigm shift” in the perception and use of digital assets such as Bitcoin ( BTC ) and central bank digital currencies (CBDCs) could threaten the dominance of the United States dollar as a global currency, warns Wall Street investment bank Morgan Stanley. 

While the U.S. dollar makes up roughly 60% of global foreign exchange reserves, a “paradigm shift in the global perception and use of digital assets” could challenge the dollar’s leadership,  wrote Morgan Stanley’s head of digital assets, Andrew Peel, in a Jan. 12 investment note.

Peel said the shift has now been significantly accelerated by the U.S. Securities and Exchange’s approval of several spot Bitcoin exchange-traded funds in the U.S., with weekly inflows into the new products topping $1.18 billion.

Additionally, Peel looked to Bitcoin’s “remarkable” global adoption over the past 15 years as evidence for its continual growth, noting that 106 million people around the world currently hold the cryptocurrency and added that there are now Bitcoin ATMs in more than 80 countries.

Meanwhile, other countries’ CBDCs could also impact the dollar’s dominance, which would enable speedy cross-border payments without the need for a common currency.

“[CBDCs] hold the potential to establish a unified standard for cross-border payments, which could diminish the reliance on traditional intermediaries like SWIFT and the use of dominant currencies such as the dollar.”

According to data from the Atlantic Council CBDC Tracker, 130 countries — representing over 98% of global gross domestic product — are exploring or developing CBDCs, marking an outsized increase from just a few years ago.

Bitcoin’s ‘remarkable’ growth and CBDCs threaten the US dollar — Morgan Stanley image 0 130 countries are currently in the process of exploring a CBDC. Source: Atlantic Council

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“Furthermore, CBDCs can enable significant innovation in financial services, such as the use of smart contracts for automating payments, making the concept of programmable money a practical reality,” Peel added.

While Bitcoin and CBDCs could impact U.S. dollar dominance, Peel noted that stablecoins could prove a more helpful addition to global finance, describing the largely fiat-pegged stablecoins as crypto’s “killer app.”

“With their increasing importance, dollar-backed stablecoins are set to have a profound impact on the financial sector, potentially reshaping how money is moved across borders.”

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