Experts at Morgan Stanley believe that in the future, central banks could use government-owned cryptocurrency to set negative interest rates and prevent a financial crisis.
A team of specialists led by expert Shena Sha prepared a report in which they analyzed exactly how cryptocurrency can be used to more effectively manage money in circulation. The document says that such technology would help banks take interest rates to new levels by applying policy directly to the money in circulation, rather than to intermediaries such as financial institutions.
Establishing a negative interest rate on bank deposits is an anti-crisis measure that is used by governments in several countries to artificially introduce additional money into the economy. Such a policy could help bring over-leveraged economies out of crisis.
«Free circulation of banknotes and coins limits the ability of central banks to set negative interest rates. A digital version of cash could theoretically allow negative interest rates on deposits for all money in circulation in any economy. Central banks would then have to go directly to currency users to implement monetary policy, significantly reducing leverage in the system and reducing GDPgrowth,” the report said.
Such a system would improve the efficiency of central bank policy implementation, but there would then be a massive capital outflow to decentralized cryptocurrencies. Once word got out that a bank was going to implement negative interest rates - a policy that forces people to pay to hold currency - people would switch to bitcoin or other decentralized cryptocurrencies to secure their wealth, although this decision would likely depend on the volatility of such assets.
According to https://www.ccn.com
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