Experts of Bank Morgan Stanley suggested that digital currencies can help to improve negative interest rates under a future financial crisis. According to the new insights Morgan Stanley, Central banks can use crypto currencies to reduce the negative consequences following the financial crisis, reducing interest rates.
Business Insider, a team of strategists of the international investment Bank talked about several areas where Central banks could adopt the cryptocurrencies in its favor. The most notable use of volatile digital currencies is their use in the field of monetary policy. In the report Morgan Stanley States that in the event of another major financial crisis, Central banks can increase interest rates up to even higher negative values than ever.
Business Insider notes that during the recent financial crisis Central banks around the world sharply reduced interest rates to mitigate the effects of economic collapse consumers and creditors. Banks of Sweden, Denmark, Japan and the EU has adopted negative interest rates, some of which remain to this day (however, not below -0,5%). The team at Morgan Stanley explain:
«Theoretically, completely digital cash system can provide a higher negative rate. This applies to some Central banks. Negotiable paper notes and coins (cash) limit the ability of Central banks to apply negative rates on deposits. Digital version of cash, theoretically, could allow the introduction of negative rates that will be charged to all money in circulation in any economy».
However, the researchers also explained that their report «does not mean that we believe that the introduction of digital Fiat currency and have studied all the consequences of such step». In addition, there are some serious potential problems inherent in such a digital system. Experts at Morgan Stanley say:
«High and long negative rates, ultimately, are problematic for the banks. Then the Central banks have directly contact with currency buyers for the implementation of monetary policy, significantly reducing leverage in the system and reducing the growth rate of GDP.»