Morgan Stanley: Crypto assets are reshaping the global financial system

Source: Blockchain Knight

With the rapid development of technology and the changing geopolitical landscape, the global financial system is at a crossroads. The dominance of the U.S. dollar faces challenges from emerging Crypto assets such as BTC.

Morgan Stanley provides a detailed and thoughtful view on the development of Crypto assets in 2024, especially in the context of new financial trends.

Although the United States contributes only about 25% to global GDP, the U.S. dollar accounts for nearly 60% of global foreign exchange reserves. However, this disproportionate impact is being carefully scrutinized and evaluated.

In response to U.S. monetary policy and economic sanctions, countries are using some strategic measures to increasingly diversify their currency reserves.

The EU and China are at the forefront of this shift and seek to strengthen the role of the euro and the renminbi in international trade.

At the same time, the Crypto asset market is also growing exponentially. BTC has grown from an internet forum idea into a sovereign reserve asset.

The market value of BTC is comparable to the GDP of major economies such as Switzerland. Countries such as El Salvador and the Central African Republic have also adopted BTC. Its influence on the global financial stage is unquestionable.

Andrew Peel, executive director of digital asset markets at Morgan Stanley, wrote: “Beyond speculative purposes, BTC adoption continues to develop.”

“In January this year, the U.S. Regulators have given BlackRock and 10 other asset managers the green light to offer spot BTC ETFs, a potential paradigm shift in the global perception and use of digital assets."

Meanwhile , the adoption rate of stablecoins has also been staggering, especially those pegged to the U.S. dollar. In 2022, these assets processed nearly $10 trillion in transaction volume.

This growth demonstrates their growing importance in the digital asset space, facilitating efficient round-the-clock trading and near-instant settlement.

As a result, Visa integrated Circle’s USD stablecoin on Solana and PayPal launched PayPal USD, reflecting a major shift in embracing blockchain technology.

The rapid popularity of stablecoins has also fueled interest in CBDCs (central bank digital currencies). As of mid-2023, countries actively exploring CBDC account for more than 95% of global GDP.

Unlike decentralized Crypto assets, these digital currencies provide centralized control of the currency system and are expected to increase the efficiency and innovation of financial services.

For example, China’s launch of the digital yuan and Brazil’s digital currency plan DREX are examples of this trend.

Morgan Stanley’s analysis emphasizes that the advancement of digital assets such as BTC, stablecoins and CBDC is reshaping the financial system.

Understanding the implications of these developments and monetary policy is critical to global financial stability and macro investors. In fact, the adoption of digital currencies signals a shift in global economic dynamics.

In this context, the role of BTC and stablecoins is particularly important. BTC’s widespread adoption, including being used as a legal tender in El Salvador, reflects its growing legitimacy.

With their utility in cross-border transactions and value storage, stablecoins are bound to have an impact on the way global currencies flow.

Peel concluded: “While changes in global trade and currency usage are likely to be incremental during the early adoption stages of these digital solutions, over time they are expected to gain mainstream acceptance.”< /p>

“As the world adapts to these technological advances, it is critical to understand the interactions and nuances between traditional fiat currencies, BTC, e-currencies and stablecoins.”

Similarly, the emergence of CBDC also brings opportunities and challenges. These digital currencies promise to increase the efficiency of financial transactions and potentially financial inclusion. However, they also need to carefully manage the implications for privacy, security, and monetary sovereignty.